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THE WAY TO OUTDO ENGLAND WITHOUT FIGHTING HER.
LETTERS
Hon. SCHUYLER COLFAX,
Speaker of the House of Eepresentatives,
ON THE PAPER, THE IRON, THE FARMER'S, THE RAILROAD,
AND THE CURRENCY QUESTIONS.
BY
HENEY 0. CAEEY,
AUTHOR OF '' PRINCIPLES OF SOCIAL SCIENCE," ETC. ETC.
PHILADELPHIA:
HENEY CAEEY BAIED,
INDUSTRIAL PUBLISHER,
406 Walnut Street.
1865.
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COLLINS, PRINTER, 705 JAYNE ST.
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CONTENTS.
The Paper Question :
Letter First
Letter Second
Letter Third
Letter Fourth
The Ikon Question :
Letter Fifth
Letter Sixth
Letter Seventh ,
Letter Eighth
The Farmer's Question :
Letter Ninth
Letter Tenth
The Railroad Question :
Letter Eleventh
PAGE
3
13
22
30
42
62
60
69
86
96
e Currency Question :
. IIU
Letter Twelfth
. 126
Letter Thirteenth ....
. 133
Letter Fourteenth ....
. 142
Letter Fifteenth ....
. 151
Letter Sixteenth ....
. 159
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THE PAPER QUESTION
LETTER FIRST.
Dear Sir : —
The gentlemen connected with the press, publishers of books
and newspapers, have been for two years past, and are yet, engaged
in the performance of an act that, as it seems to me, closely resem-
bles suicide; and it is because of my desire to open their eyes to the
fact that it really is suicidal in its tendencies, that I venture to
trouble you with the perusal of this letter. Throughout by far the
larger portion of my life I was one among them, and although
many years have elapsed since I ceased to be connected with the
business of publication, the feeling of interest in those concerned in
it has remained wholly unimpaired. It is, therefore, as an old
friend, late a co-laborer with themselves — a fellow-citizen having no
interest in the question except in common with all who are around
him— that to you, and through you to them, I propose to speak,
hoping that they may be disposed to reflect carefully on the views
that will be presented, and confidently believing that they may be
satisfied that their recent course of proceeding, however injurious it
may be to the makers of paper, tends to the production of results
utterly destructive to themselves.
Most naturally they are anxious that paper shall be cheap, and
that their business may be large and profitable. So am I, well
knowing, as I do, that it is to the universal development of intellect
among our people that we now stand indebted for the fact that this
Union has befen maintained ; and, that if we are to prosper in the
future it is in the direction of a further and more complete develop-
ment of the national mind that prosperity must be sought. To
that end, books and newspapers must be placed within the reach of
all, old and young, poor and rich, black and white.
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Thus fully agreeing with them in the result at which we should
desire to arrive, I propose now to ask both you and them to look
with me to the measures by which it may be attained. To that end,
allow me now to ask the question — What are the circumstances
under which commodities of all kinds tend to become cheaper ? Is
it not when and where there is competition for their saW^ What,
on the contrary, are those in which they tend to become dearer ?
Is it not when and where there is competition for their purchase'^
To these questions there can be but one reply, and that in the
affirmative.
What, now, I would ask, has been the tendency of the action of
our publishing friends throughout the last two years ? Has it tended
to promote the building of mills and the increase of competition for
the sale of paper ? As it seems to me, it has not. On the con-
trary, as I propose to show, it has been in a direction exactly the
reverse of this. If so, are not, then, they themselves the authors
of the grievances of which they now so much complain ? That
they are, I firmly believe, and equally firm is my belief that they
may be satisfied that such has been the case. Should they be so,
then may we once again see harmony established between two
great interests, each of which is so directly interested in the pros-
j^rity of the other that it is, as I am very certain, entirely impos-
sible to injure either one without at the same time inflicting serious
injury on the other. Break down the cotton-spinners, and the
weavers will soon cease to prosper. Break down the paper-makers,
and the printers will soon see their hands deprived of employment,
and their offices closed.
By the free-trade tariff of 1846, that tariff to which we are mainly
indebted for all our present troubles, the duty on paper was fixed at
30 per cent. By the ultra free-trade tariff of 185Y it was reduced
to 24 per cent. ; but as the duties on all the raw materials of the
manufacture — soda ash, bleaching powders, rosin, felting, wire-
cloths, &c. &c. — were correspondingly reduced, the change was
really unimportant.
By the Act of 1861 paper was restored to the place assigned to
it by the free-traders of 1846, being subjected to a duty of 30 per
cent. The duties on raw materials were, however, largely increased,
and in some cases more than trebled. Alum was carried up from
15 to 50 cents per 100 pounds, while bleaching powders were raised
from 4 cents to 30, and soda ash from 4 to 50. Such having been
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the case, it may be regarded as certain that this most important
manufacture had not been allowed to profit in even the slightest
degree of the adoption by the Chicago Convention of Protection to
Domestic Industry as a part of the platform of principles upon
which the party was to stand for all the future. Of all the various
industries of the country, it was, as I believe, the only one that was
thus excluded, and yet, in all my intercourse since that date with
gentlemen interested therein, I have never heard the exclusion made
the subject of complaint. It w^as wrong, nevertheless.
At the date of the passage of that act the country had for several
months been so greatly agitated by the secession movement that
trade of all kinds was nearly at a stand. Competition for the pur-
chase of paper had no existence ; but the competition for its sale
had so greatly grown that the market price was below its actual
cost, while every foreign product used in the manufacture came to
the manufacturer burthened with the increase of duty to which I
have referred. This state of things continued throughout the whole
of the year 1861, and the change was afterwards but very slight
until towards the close of the summer of 1862. As a consequence
of this long-continued pressure upon their resources many paper-
makers became bankrupt, while throughout the country mills were
everywhere idle and unproductive.
Such was the state of things when, on the first of July, 1862,
Congress passed a law imposing a tax of 3 per cent, upon all the
paper made in the country, and a further tax of 3 per cent, upon
the incomes of all concerned in the making of it. A fortnight
later, with a view to retaining for the domestic manufacturer the
place, in reference to the foreign one, he previously had occupied,
the duties on imports were increased, and paper w^as raised from 30
to 35 per cent. Thus far, therefore, the paper-maker continued
to be excluded from all share in the advantages derived by other
branches of manufacture from the great change of public opinion
that had been manifested by the most enthusiastic adoption of the
protectionist plank of the Chicago Platform.
Shortly after this the commerce of the country began most rapidly
to revive, and with that revival came a great increase in the demand
for paper. Then, and not until then, the paper consuming world
began to appreciate the efifect on the supply of rags resulting from
the closing of Southern ports against the export of cotton. Cotton
goods were scarce and dear, and all were endeavoring to avoid their
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purchase. The old shirt continued to be used when, under other
circumstances, it would have gone to the paper-mill. Cotton waste
was no longer to be obtained. Linens, too, had greatly risen. The
domestic supply of raw material was wholly insufficient for meeting
the now rapidly increasing demand, and prices rose with a rapidity
proportionate to the alarm excited among the paper-makers in refer-
ence to the power to keep their mills at work, and among the con-
sumers in reference to obtaining at any price a full supply of paper.
Abroad, and for the same reason, prices had advanced, and to the
augmentation thus produced was here to be added the premium on
the gold with which to pay for the rags that might be thence ob-
tained. To all this was further to be added the premium on the
gold required to pay for the alum, the bleaching powder, the felt-
ing, the wire-cloth, and other commodities needed in the manufac-
ture. Coal, of which there is required, as I am assured, pound for
pound of paper, and even more, had much increased in price, while
labor also had much advanced.
As a consequence of all these things the price of paper went
rapidly up, and to those manufacturers who had succeeded in stem-
ming the tide in the past two years, there opened up a prospect
of obtaining profits that might perhaps indemnify them for the
losses that had been sustained. This was precisely the state of
things that should have been desired by the paper consumers, being
that which was needed for reopening mills that had been closed, for
promoting the building of new ones, for utilizing new materials,
and for thus stimulating all to increased competition for the sale
of paper. Instead of looking at it in this light, they at once raised
a cry of monopoly which w^as persevered in throughout the whole of
the ensuing session of Congress, until, just at its close, the duty on
paper was,^ ??ios^ unfortunately for those who asked it, reduced to
20 per cent. More unfortunate by far would they have been had
they fully succeeded, as they had asked an entire repeal of the duty,
the effect of which must have been that of closing nearly every
printing paper-mill in the country, and placing them entirely at the
mercy of European manufacturers. Had they then succeeded, they
would this day be as clamorous for the re-establishment of protec-
tion as they now are for an extension of the free trade system.
The duty on printing paper had now been reduced to one-sixth less
than that at which it had been fixed by the ultra free trade tariff of
1857. In the mean time raw materials of every kind had been
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heavily taxed — paper itself had been taxed three per cent. — and the
incomes of the unfortunate people who had thus been placed under
the ban had been subjected to a tax of the same amount. Making
allowance for all these things the real duty, to which they could at
all look fpr protection, w^as not even one-half as great as it had
been under that ultra free trade tariff to which we had been so
largely indebted for the crisis of 1857 and for the ruin of so large a
proportion of the most useful portion of our people.
Why, however, it may be asked, should any protection yet be
needed ? . For an answer to this question I would beg, my dear sir,
to refer you to the following passage from a Report made but a few
years since to the British Parliament, every word of which is as
fully applicable to the trades in paper, glass, cloth, and chemicals,
as it is to that in iron : —
'' The laboring classes generally, in the manufacturing districts of
this country and especially in the iron and coal districts, are very
little aware of the extent to which they are often indebted for their
being employed at all to the immense losses which their employers
voluntarily incur in bad times, in order to destroy foreign competi-
tion, and to gain ojid keep possession of foreign markets. Au-
thentic instances are well known of employers having in such times
carried on their works at a loss amounting in the aggregate to
tjiree or four hundred thousand pounds in the course of three or
four years. If the efforts of those who encourage the combinations
to restrict the amount of labor and to produce strikes were to be
successful for any length of time, the great accumulations of capital
could no longer be made which enable a few of the most wealthy
capitalists to overwhelm all foreign competition in times of great
depression, and thus to clear the way for the whole trade to step
in when prices revive, and to carry on a great business before foreign
capital can again accumulate to such an extent as to be able to
establish a competition in prices with any chance of success. The
large capitals of this country are the great instruments of warfare
against the competing capital of foreign countries, and are the most
essential instruments now remaining by which our manufacturing
supremacy can be maintained ; the other elements — cheap labor,
abundance of raw material, means of communication, and skilled
labor — being rapidly in process of being equalized."
The ''great capitalists" here referred to are steadily creating
monopolies for themselves in Great Britain herself as well as in
foreign countries. When they supply foreign markets at less than
cost they do the same at home, and thus ruin the small capitalists
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around them. Therefore is it that the iron manufacture and the
ownership of mines are becoming from year to year more and more
concentrated in the hands of a few wealthy men, who hold quar-
terly meetings at which they decide how much coal shall be mined,
how much iron is to be made, and at what prices the two may be
sold. It is in the hands of just such men, immediate neighbors of
those above described, that the consumers of paper are now labor-
ing to place the control of the supply of the commodity they so
much need. Whether or not it is in that direction they are to look
for that increase in the competition for its sale without which there
can be no reduction of prices, I leave it to you and them to judge.
Notwithstanding the reduction of duty that had taken place,
some few mills, as I am informed, were built in 1863. Others that
had been closed were once again opened, and had the paper con-
sumers been willing to let the matter rest where it had been placed
by the act of March of that year, it is quite certain that the number
of new ones would by this time have been so largely increased as to
set at rest for all future time the question of supply. Had they
so acquiesced, the competition at the present moment would, as I
am well satisfied, be for the sale, and not for the purchase of paper.
The tendency of prices would have then been downwards.
That, however, they did not do. On the contrary, agitation for
the total repeal of the duty was kept steadily up, with no effect so
far as regarded the action of Congress, but with, to themselves^ the
most injurious effect upon the public mind. Up to that time there
had still existed a strong belief that the necessity for revenue, and
the growing conviction that it had been to protection we had been
indebted for the power to pass through the great crisis of the rebel-
lion, must suffice for making permanent the system that had been so
well established. Now, however, it came to be seen that there was
really no security, and that any one who should build a paper-mill
would do it with the sword of Damocles always suspended over his
head, and ever ready to fall. How this has probably affected the
minds of hundreds of persons may be judged from a fact that is of
my own knowledge. A year since, one of my friends, a man of
large means, was preparing to make a great addition to the paper-
producing power of the country, but of this idea he was entirely
cured by the action of the paper consumers during the late session
of Congress, and his works remain unbuilt. What is true of him
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cannot fail to have been equally so of very many others similarly
situated. Capital has been abundant, but it has not gone in the
direction of mills for making printing-paper, nor will it do so while
the agitation shall be continued. Capitalists are timid people.
They see that the paper consumers seem resolved upon killing the
paper producers, and are not yet quite ready to bow their heads to
the axe.
The agitation has now recommenced, and with redoubled force.
It may be that our friends who are so anxious for cheap paper will
this time succeed. If they shall do so, it is my prediction, and I
pray you to note it, that, ere long, they will regret it far more bit-
terly than will the men whose mills will then have been closed, and
who will then have been ruined. For a very brief period they may
have paper cheaper from abroad ; but as by degrees the weaker
manufacturers are driven out of the business, the demand on Europe
will steadily grow, and with that growth there will be an increase
of the European prices that will make their paper cost them more
than now, and that increase will be a permanent one. Those
few among ourselves who can afford to stand aloof until the work of
destruction shall have been accomplished will then step in and divide
with the European manufacturers the profits of the market. Quar-
terly meetings will then probably be held, at which it will be decided
what is the price at which the consumers of paper will be permitted
to obtain the supplies they need, and the latter will then discover
that they have exchanged the rule of the quiet king Log for that
of the active and energetic Stork, so well described by our old friend
JEsop. Few of them will now, probably, be disposed to believe
this, but they will realize its absolute truth should they this time be
so unfortunate as to succeed in the work in which they are engaged.
Unhappily for them, the damage will then have become irreme-
diable.
To those who may doubt the correctness of the views thus
presented, I beg to recommend a consideration of the following
Rags can be more cheaply brought to England, France, and Bel-
gium than to these United States :
Labor is there abundant and cheap, while here it is scarce and
The field for the employment of labor throughout the South and
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10
West is likely to enlarge with such rapidity as to cause that scarcity
and that dearness to continue for a long period of time :
Iron is cheaper abroad, and machinery may there be obtained at
greatly lower cost :
Felting, bleaching powders, alum, and all other of the commodi-
ties used in making paper, can be obtained free of the duty they
must pay on entering here :
Coal is cheaper, and steam is less costly :
Interest is there little more than half of what is paid by the
American manufacturer ; and —
There is there no excise duty of three per cent.
Sach being a part only of the great differences between the two
sides of the Atlantic, can any reasonable man, proprietor of a news-
paper, doubt- that the " great capitals" of Europe will at once be
set to work to crush out American competition for the sale of this
great commodity, an abundant and cheap supply of which is now
more important than it has been at any period of our history ? If
any such there should prove to be, he would, as I think, only furnish
new evidence of the perfect truth of the idea, that " whom the gods
would destroy, they first make mad."
Were I owner of the Tribune, Post, or Ledger, and in that
capacity invested with full power to act for our friends of the Asso-
ciated Press, the change that is now asked for should not be made
were the foreign manufacturers ready to pay into the treasury of that
association, to be distributed pro rata, according to their interests,
among the book and newspaper publishers of the country, thirty
millions of dollars. Large as is this sum, I would reject it, and
for the reason, that it would be no compensation for the damage to
be done to the private interests of my associates, leaving wholly out
of view those of the country at large.
In regard to these latter, I will only call your attention to the
fact, that the day is close at hand when we shall have to provide
literary food for. sixty millions of people, and that if they are to be
at all supplied it must be by means of measures that shall tend to
enable small manufacturers to accumulate capital and enlarge their
operations so as to increase the competition for the sale of paper;
and not by means of a present agitation which alarms the great
capitalist and prevents him from investing his means in this depart-
ment of manufacture, to be followed by a British free-trade policy
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11
that cannot fail to bring with it utter ruin to all the smaller capi-
talists already engaged in it.
Ten years since there was a similar agitation for the abolition of
duties on railroad iron. It lasted several years, and, as I believe,
until the revulsion of ISS^T had taught us the advantages of the
British free-trade system. During all that time no one could be
found hardy enough to build either a mill or a furnace. After the
revulsion there was great depression, as a consequence of which the
consumption of iron in I860 was scarcely, if at all, greater than it
had been a dozen years before, and yet the population had increased
more than forty per cent. But for that agitation, we should to-day
be producing thrice the quantity of iron that is now being con-
sumed; we should be exporting instead of importing it; the demand
for gold would be less; and our people would be saving annually on
their purchases of that one commodity fifteen or twenty millions of
dollars. Just so will it Tdc with our publishing friends. Their
agitation of the past three years has already thrown us back at
least one year. Let them now succeed, and they will throw them-
selves back twenty years, for then no one can ever again have the
smallest confidence in any change of system that may be made.
If paper-making is really very profitable, let them build mills and
thus promote competition for the supply of the market. In this
way they will serve themselves and their country too. The intro-
duction of new materials to take the place of the now deficient
cotton demands large investments of capital, but will in the end
greatly lessen the cost of paper. Let them supply that capital.
Pending the existing agitation others will certainly not do so.
Having thus shown what, as I think, they owe to themselves, I
propose in another letter to show what are the privileges they enjoy,
and what are the duties they owe to the community of which they
are a part. In the mean time, allow me, my dear sir, to ask you to
reflect for a moment on the moral of another well-known fable of
uEsop, entitled ''The "Wind and the Sun." The more the former
raged the more the traveller clung to his cloak, and the more
closely he wrapped it around his limbs. Seeing this, Mr. Wind
abandoned the effort, and made way for Mr. Sun, under the powerful
influence of whose beams the cloak was quickly laid aside. Our
friends have played the part of Wind for two years past, and with no
other effect than that of raising the price of paper. Let them now
take that of Sun — let them declare for a pei^manent peace — and
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12
there will be more mills built in the next twelve months than have
been built in the past three years, or will be so in the next half
century if the war is to be maintained.
Begging you now to excuse this trespass on your attention, and
hoping that you may find in what I have written evidence of my
sincere anxiety for the prosperity of the great publishing interests,
I remain, my dear sir, with great regard and respect,
Yours, faithfully,
HENRY C. CAREY.
Hon. Schuyler Colfax.
Philadelphia, Dec. 24, 1864.
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THE PAPEE QUESTION.
LETTER SECOND.
Dear Sir : —
Hitherto, agitation in reference to the proposed repeal of the
paper duty has been carried on through the public prints. Now,
however, the course of operation seems to be entirely different, not
an editorial line in reference to it having yet met my eyes, with the
single exception of a brief article from the Evening Post, here
given for the reason that always in the past it has been, and now
is, my wish that our people should have the opportunity afforded
them of seeing all that could be said on both sides of the great
question of bringing the consumer to the side of the producer, and
thus relieving the farmer from the oppressive tax of transportation
to which he has so long been subjected. Had the Post, and its
free trade brethren, followed the example, we might have been saved
much of the loss and trouble of the past four years. The article
referred to is as follows : —
The Paper Duty. — ''The duty on printing paper w^as, we sap-
pose, intended by those who laid it to produce revenue to the trea-
sury. Its only effect, however, is to put money into the pockets of
the American manufacturers. The duty is twenty per cent., ad va-
lorem; this is payable in gold, and it has made importation impos-
sible. It does this in the following way : —
''The manufacturers of printing paper here set their prices so as
to leave no margin of certain profit to the importer who must pay
a duty of twenty per cent, in gold, at the same time their profits
enable them, if necessary, to undersell and drive out of the market
with loss any one who should attempt to import
" Printing paper sold for from nine to ten cents per pound before
the war. It is sold for eight cents per pound in Europe at this
time. But in this country publishers are forced to pay for news-
paper from twenty-four to thirty cents. Take off the duty and it
can be imported for from seventeen to eighteen cents per pound,
currency ; and at that price American manufacturers can still make
and sell at a fair profit.
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14
" A duty which yields no revenue is an absurdity. The present
twenty per cent, duty upon paper is prohibitory, its only use is to
take money out of the pockets of the public and put it into the
pockets of a few already wealthy manufacturers. Even the govern-
ment pays tribute, under present arrangements, to these capitalists
for the immense quantity of paper it uses. The present Congress
ought to remedy this wrong by repealing the duty on paper.'^
That what is here given as fact in regard to the cost of paper,
and the profits of paper-making, is wholly incorrect might readily
be shown, but I have no desire to annoy you with the examination
of little figures. It is greatly to the interest of the publishers of
both books and newspapers that the makers of paper should be so
well paid as to enable those who are in the business to extend their
works, while stimulating outside capitalists to employ their means
in erecting new ones; and if I could be assured that all were really
as herein stated, I should most heartily rejoice at it in the interest of
the paper consumers. Let it be clearly shown that paper-mills
can be securely relied upon to yield ten, twelve, or fifteen per cent,
per annum, and we shall see more new ones commenced in the next
twelve months than have been started in the last decade. Let the
work of agitation be continued and there will not be even a single
one ; and that, too, even if it prove, session after session for the
next ten years, to be wholly fruitless. The capitalist will not,
with his eyes now fully opened, engage in a war with the Press.
If/ then, the monopoly here complained of be continued, our pub-
lishing friends will have only themselves to thank for it.
It is complained that the duty is prohibitory, and yet, making
allowances for taxes imposed since 1860, the protection afforded
is less than ten per cent. If, at such a moderate rate, the foreign
traders of New York, admirable as they have always been in the
manufacture of false invoices, cannot import paper, there can exist
no shadow even of cause for complaint. As it seems to me the
Fost has proved rather too much.
What, however, are the privileges now enjoyed by that and other
journals ? Do they at all savor of prohibition ? Let us inquire.
Five years since there were two branches of industry that were
protected by means of absolute prohibition of foreign interference,
the production of negro slaves, and that of newspapers. The Vir-
ginia planter, anxious as he might be for free trade in iron, could
manufacture his corn into chattels for which he could obtain eight,
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15
or even ten times the price at which similar machines could be im-
ported from abroad. Why was this ? Because Congress had pro-
hibited foreign competition, and thus preserved to him the control
of the domestic market. That branch of manufacture having,
however, been since abolished, there now remains but a single one
that profits by prohibition, and must, in all future times, continue
so to do — that one being the newspaper.
The Post, the Tribune, the Ledger, the North American, the
Transcript, and the Daily Advertiser, cannot be produced abroad.
Come what may— let us have war or peace, prosperity or adversity,
free trade or protection— they must still be manufactured in New
York, Philadelphia, and Boston. The control of the domestic
market is thus secured to the domestic manufacturer, and by a law
that can never be repealed ; and therefore is it that the consumer is
supplied with information at less cost than in any country of the
world. So will it be with paper whenever the consumers shall have
arrived at the conclusion that the law which has proved in their
own cases so very true cannot fail to prove equally so in regard to
the commodities in whose cheap production they are so deeply in-
terested.
Not only have the proprietors of these and other journals a
monopoly of the general market of the country, as against foreigners,
but they have, each and all, their shares in a monopoly that is not
to be interfered with even by the domestic capitalist. To start a
new paper in New York, and to continue it long enough to secure
the circulation without which advertising cannot be obtained, is a
work that certainly cannot to-day be accomplished at a cost of
$250,000. It might cost much more than this, and even then it
might prove a failure. So clearly is this understood that the pro-
prietors of existing journals now laugh to scorn the idea of danger
from future interference.
Perfectly secure, then, against both foreign and domestic com-
petition, those gentlemen are enabled to throw upon the public all
of the burthen of which they now so much complain, the former
one cent paper being now sold for two, and the two cent one for
four— the difference being nearly the whole cost of the paper that is
used. A pound will give 18 sheets for the first and 10 or 12 for the
second, and thus the additional charge is little less than twenty cents
per pound. In many cases it exceeds 25 cents per pound. Such
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paper may now, as I am informed, readily be bought for from 20
to 23 cents.
Turning next to advertising, we find New York journalists pro-
fiting of their absolute monopoly by charging nearly as much for the
insertion of a single line as formerly would have been charged for
that of a whole square. Forty cents per line is, as I am told, the
present charge of the Herald. In several of the weekly papers it is
from $1 to $1.50 per line. Surely the persons who make such
charges have little reason to complain of the present trivial duty
upon the one great commodity they so much need.
Secured thus, now and forever, in the enjoyment of one of the
greatest monopolies of the world, the selling price of interests in
these journals is wonderfully great. Shares in several of them can
be sold, as I understand, at the rate of from three to five hundred
thousand dollars for the whole, the purchaser paying in addition as
much as may be considered the fair value of an equivalent share of
the machinery in use. Elsewhere larger sums would, as I under-
stand, be demanded, and when we should reach the highest figure it
would probably prove to be little short of $800,000.
Let this now be compared with the value of the property that is
devoted to the production of printing paper, and then determine
which of the parties to this suit it is that has most reason for
complaint. There is not, as I am assured, and as I believe, a print-
ing paper-mill in any of the Atlantic States that would sell for
more than the actual cost of the buildings and machinery, while
some, and even the best of them, may be had this day at much less
than the actual cost. If the profits of such concerns are really as
large as they are described by the Post to be, why do not the com-
plainants purchase them and manufacture on their own account ?
For the simple reason that the making of printing paper, on an
average of the last half century, has been one of the worst paid pur-
suits in which a man could be engaged. It would be difficult, as I
believe, to find any one requiring as much intelligence and as much
capital in which so few have acquired fortunes.
On some recent occasion I have seen a statement of the wonderful
growth in prosperity of the Post itself, and unless I am greatly in
error in regard to the figures therein given, the mere good-will of
that paper, which has cost no man even a single shilling, would
sell for more than all the buildings and machinery of the largest
printing paper mill in the Union.
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While presenting these facts I beg not to be regarded as at all
complaining of the prosperity of journalists. The more they pros-
per the more shall I rejoice, but not the less shall I object to their
complaining of a miserable little item of protection, while they are
becoming rich by help of an absolute prohibition established by
nature herself, and not in any manner dependent on the caprices of
Congress. The eagle suffers little birds to sing, and they, as I
think, may well afford to permit the poor paper-makers to live and
educate their children, even if they be not allowed to leave behind
them any fortune.
What is true of journalists is almost equally so in regard to the
publishers of books. In former times Worcester, Albany, Pough-
keepsie, Baltimore, Washington, and Richmond, competed with
Boston, New York, and Philadelphia, in this department of manu-
facture. Within these latter, too, there was a competition that
made it very dangerous to fix a book at too high a price. Gradu-
ally, machinery took the place of the human hand, and with every
such improvement the business of publication more and more cen-
tered itself in the three great cities, the reading public profiting,
by means of cheap books, of all the changes that were made. The
business grew, and with that growth came a division of employ-
ments ; the various departments of literature obtaining each their
special representatives. With every step in this direction there
came a diminution of competition accompanied by a rise of price, the
result now exhibiting itself in this fact, that books are rapidly attain-
ing the enormous English prices. At no time, as I am informed, and
as I believe, have profits been so large. If this is so, as it probably
is, surely the men who make them may permit their slaves to live.
They must do so if they would continue to live themselves. Close
the American paper mills, and most of them will be closed if
Congress shall sanction the commission of the suicidal act that is
now proposed, and we shall not long continue to hear of 15, 20, 50,
and even as high as 100,000 dollars a year as the profit realized by
the publishers of a single magazine or a single newspaper.
The word slave has been used above, and most advisedly. Our
people are divided into two great classes, those who can, and those
who cannot, maintain direct commerce with the consumers of their
products. The first constitute the privileged class vested witk
power to control at their discretion the movements of the second,
these last ''living, moving, and having their being" at the plea-
2
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sure of their masters. The owner of the railroad fixes for himself
the terms on which he will permit the coal producer, or the traveller,
to use his road ; and he adheres to his contract just so long as it
suits him, and not an hour longer. He interprets the words of his
charter to suit himself, well knowing that he is in the full enjoyment
of a monopoly, and that he can set at defiance all efforts at resist-
ance. It is through him, and him alone, that the railroad iron
manufacturer draws his support from the public at large. He,
therefore, may meet his fellow managers for the purpose of determin-
ing in secret conclave exactly to what extent it may be safe to
grind the poor producers of wheat, cotton, coal, and iron ; but let
the iron producers hold a meeting and at once a cry is raised of
combination to keep up prices and thus to rob the public, the aid
of Congress being then at once invoked for the punishment of men
who manifest such determination '' to grind the* faces of the poor.''
The book publisher deals directly with the public, and he arranges
his prices to suit himself. Through him it is that the printer and
the binder deal with the world at large. As a necessary conse-
quence of this, the middleman builds a palace in which to transact
his business, and another in which to live ; while the poor printer,
or the yet poorer binder, is forced to rejoice in the fact that he yet
obtains the means with which to educate his children and to clothe
himself.
The maker of writing paper deals, if he pleases, directly with the
outside world. He may open a shop when and where it suits him,
as a consequence of which the stationer respects his rights. He,
therefore, has been permitted to retain all the protection granted to
him by the tarifl's of '61 and '62.
Widely different is the condition of the maker of printing paper,
for to enable him to maintain commerce with the world, he must
have the aid of the publishers of books and newspapers. They are,
therefore, his masters. If he and his fellow-slaves meet together
to talk of their general interests, there is charge of '^combination."
The book is doubled in price, its publisher thus forcing the con-
sumer to pay all his taxes, with the usual profits thereon to him-
self, he himself, meanwhile, denying the right of the paper-makers
even to consult together on the propriety of adding to their prices
the simple amount of their contributions for the support of Govern-
ment.
The publisher of newspapers, secure in the enjoyment of his
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monopoly, eares nothing about tariffs. The world may complain
as it likes when he doubles, trebles, or even quadruples the charge
for advertising, he well knowing that, like the collector of railroad
tolls, or steamboat fares, he has but to ring his bell to have them
all '' step up to the captain's office and settle. '^ Of all the privi-
leged classes of the country he is the man who is most secure. If
his hands turn out he calls on the public for aid in his contests with
them, and forthwith, as has recently been seen in Boston, men of
all classes come to his assistance. If, however, the poor paper-
maker be found seeking to obtain some small compensation for a
year or two of loss, he flies to Congress, talks of ^'combination
prices,'' and insists that, while he himself enjoys entire and abso-
lute protection in the domestic market, his unhappy dependent
shall be at once deprived of the little that has yet been left. Fully
secured in the enjoyment of his privileges, he rejoices when the world
is told that the value of the mere good-will of his \ establishment
counts by hundreds of thousands of dollars, while denouncing as a
monopolist the poor serf who furnishes him with paper, and who
would gladly sell to him at cost, the mill in which it is accustomed
to be made. He is, however, quite too wise to purchase.
A story is told of an old contraband that may be worth repeat-
ing here, as it tolerably well illustrates the positions of the parties.
Corn being scarce while he had a large litter of pigs to feed, he was
heard calling on Heaven to send the time when corn should be at a
shilling a bushel and pork at two shillings a pound. The governing
class having now put up their own pork to two shillings, are most
anxious to reduce the price of their neighbor's corn. The road,
however, in which they are travelling l^ads in another direction, as
they will be sure to find if they shall continue on it until they reach
its end.
Throughout the whole range of this highly privileged order of
beings there is none that has more steadily than the Post talked of
freedom ; none that has more persistently cracked the whip over
the dependent class to which I have referred, producers of fuel, ma-
chinery, and paper — hewers of its wood and drawers of its water —
the men without whose services it could not live itself for even
another hour. That such should continue to be the case now that
the Government has become dependent for its existence on the in-
ternal revenue is greatly to be regretted, and I cannot but hope
that at no distant time the editors of this journal may come to see
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that it is in efficient protection we are to find the true and only road
towards freedom of trade and freedom for man.
Before closing this letter allow me to ask your attention to the
following paragraph telegraphed last week, by the Associated Press
as I suppose, to numerous Northern journals : —
''Cost of Paper. — The Superintendent of Public Printing re-
ports to the Ways and Means Committee a deficit of five hundred
thousand dollars in the appropriation for the purchase of paper.
When the last appropriation was made, the contract price for book
paper was eighteen cents a pound. Mr. Defrees's estimate was upoii
that basis. Congress subsequently imposed a heavy tariff on paper.
Paper-makers rushed into a combination and raised the price of
paper to the amount of the duty. The Government is now paying
from thirty-one to thirty-seven cents per pound for what previously
cost eighteen to twenty-one cents. The Treasury is receiving no
revenue from paper, because none is imported, the duty being pro-
hibitory.'^
Allow me now, my dear sir, to ask you to answer to yourself if
the manufacture of statements such as these does not furnish evi-
dence of conscious weakness on the part of those by whom they
have been written. The man who mada this paragraph well knew
that the rise of which he spoke had been mainly due to the fact
that a severe drought had, during several months, diminished by
one-half the producing power of a large portion of the Northern
paper-mills, but of this he has said not even a single word. He
knew, too, that so far from Congress having ''imposed a heavy
tariff on paper,'' the last Acts of that body relating to this branch
of manufacture had been the increase of taxes on domestic products,
and the reduction, by nearly one-half, of the duties on foreign ones.
The article is throughout utterly inaccurate, yet is it given to the
world in the (Columns of journals edited and published by gentlemen
who would feel themselves much aggrieved were we,, in regard to
private matters, to question their character for strict veracity. It
is, however, but a repetition of the story of The Wolf and the Lamb,
so well presented to us by our old friend JGsop. Determined to
crush out his poor slave the master holds him responsible for all
the accidents that have, in the last few months, diminished the sup-
ply, while adding to his own charge as much as covers nearly the
whole cost of the paper that is used.
In presenting these views of a great question that has now, as I
think, to be definitively settled, I am animated by no feeling of un-
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kindness towards any of the interests to which reference has been
made. What I do desire is to awaken all to a clear conception of
their mutual dependence. When that conception shall have been
fully reached, but not till then, a settlement of all the difficulties
may be made on terms that should be satisfactory to all, and certainly
would be advantageous to both the people and the government.
The proclamation of emancipation did much towards bringing about
the entire extinction of negro slavery throughout the continent, but
it was not until the 8th of November last that the people affixed to
it the Great Seal of the Republic. The Chicago proclamation of
emancipation for the white slaves of the North by means of effi-
cient protection was but the preparation for that great measure.
The Great Seal had yet to be affixed, and the time has now arrived
for doing it.
What is the manner in which this vitally important result is to
be attained I propose to show in another letter, first, however,
noticing the suggestions of the Post in reference to the very im-
portant question of revenue.
Meanwhile, I pray you, my dear sir, to accept the assurance of
the sincere regard and respect with which I remain,
Yours, faithfully,
HENRY C. CAREY.
Hon. Schuyler Colfax.
Philadelphia, Dec. 26, 1864.
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THE PAPEE QUESTION.
LETTER THIRD.
Dear Sir : —
Among the characters personated by the elder Matthews, in his
admirable monologues, was one of an old angler who was bit-
terly hostile to the introduction of steam navigation on the ground
that steamers ''frightened the fish." Nearly akin to this, in its
philosophy, was the idea of Mr. Walker, suggested in one of his
Reports, that protection was injurious to the nation, and for the
reason, that as domestic competition grew, prices declined with
corresponding decrease of importation and of customs revenue.
In his eyes the real saving of millions by the people was no suffi-
cient offset to the apparent loss of thousands by the Federal Govern-
ment. The loss had no real existence, the demand for sugar, tea,
coffee, and a thousand other articles having always grown with a
rapidity proportioned to that of the decline in the price of pins,
needles, knives, and cotton. Following in the same direction the
Post, participant in one of the most profitable monopolies of the
world, assures its readers that '' a duty which yields no revenue is
an absurdity'' — that it is ''prohibitory" — that" "it takes money out
of the pockets of the public and puts it into the pockets of a few
wealthy manufacturers," and that " Congress ought to remedy the
wrong by repealing the duty on paper." Not a word, however,
does it say about that natural prohibition which secures to its own
proprietors the control of the domestic market for news, and gives
to the mere good-will attached to its name a money value greater,
probably, than that of any paper-mill in the Union, with all the
land, the buildings, and the machinery of v/hich it is composed.
Nominally, the duty on printing paper is 20 per cent. ; really, it
may perhaps be 15, but is more likely to be only 12J. Admitting,
however, that the foreigner pays into the treasury 15 per cent., let
us now compare that with what we know to be contributed for the
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support of Government by the domestic manufacturer, and thus
enable ourselves to judge of the expediency of moving in the direc-
tion indicated by the Post.
The latter pays, in direct tax, three per cent, of the market value
of his products. This was paid, in the last fiscal year, upon more
than $22,000,000, and the amount received by the treasury, from
all descriptions of paper, was $663,44'7. All experience shows that
taxes become more productive as assessors come more and more
to understand their duties, and there is therefore good reason for
supposing that the yield will, in the present fiscal year, be much in-
creased. To this let us now add the tax on incomes, late three
per cent., but now five, to be paid by '' already wealthy manu-
facturers,'' who would gladly accept, at the hands of the cer-
tainly wealthy proprietors of the Post, cost for all their works.
IS'ext, add the taxes on all the steam, bricks, lumber, and iron re-
quired for the erection of buildings, or for keeping them in repair.
Further, add the amount paid as duties on soda ash, bleaching
powders, alum, felting, and other commodities used in the manu-
facture. Again, let us add the tax on coal, of which it requires,
even where water-power is used, more than pound for pound of
paper, and much more when steam-power is required. Putting all
these now together we shall probably reach ten per cent., giving a
sum exceeding two millions of dollars as the direct contribution of
this single branch of manufacture towards the payment of our
troops, and the discharge of interest on our debt. This large sum
it is that the treasury is required to relinquish in order that the
Pos^may, free of all such charges, buy its paper in Belgium,
France, or England.
The sacrifice thus far demanded by our publishing friends would
appear to be quite large, and yet it is but a portion of that which
really is required. The number of persons employed in the paper
manufacture is stated at not less than 50,000. Putting their wages
at an average of only $5 a week, we have $13,000,000. Of this, in
the form of taxes on tea, coffee, sugar, &c. &c., there goes into the
treasury probably $1,000,000, and thus do we obtain a total of
$3,000,000 that we must relinquish in order that the British and
Belgium manufacturer may be enabled to expel from our mills this
large and interesting portion of our population.
We may be told, however, that these poor people, if driven from
the mills, will find other employment. What is likely to be the
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nature of that employment may perhaps be inferred from the follow-
ing extract from a circular issued by one of the charitable associa-
tions of New York, bearing date a year and a half previous to the
occurrence of the great free-trade crisis of 1857 : —
" Up to the present, the Association has relieved 6,922 families, contain-
ing 26,896 persons, many of whom are families of unemployed mechanics and
widows with dependent children, who cannot subsist without aid. As the
season advances the destitution will increase. Last winter it was thrice
as great in January as in December, and did not reach its height until the
close of February."
It is in this state of things that immigration tends to die away,
and here we find another of those sacrifices that we must make in
order that our publishing friends may be enabled to buy their neigh-
bor's corn cheap while selling their own poyk at monopoly prices.
What are the circumstances under which immigration grows, and
what those under which it declines, I propose now to show, be-
lieving a full understanding of them to be essential to a proper
understanding of the tendencies of the movements now in progress.
The first tarifp really protective of the farmer in his efforts for draw-
ing the consumer to his side, thereby relieving him from the oppressive
tax of transportation, and from the slavery incident to a dependence
on foreign markets, was enacted in the year 1828, and began, as we
may reasonably suppose, to make itself in some degree effective in
1 830. In the decade prior to this latter year the total immigration
had amounted to 120,000^ giving an annual average of but 12,000.
Protection making demand for labor with large increase of vrages,
the effect soon exhibited itself in a larger import of persons who
had that commodity to sell, and the immigration of 1830 amounted
to 2*7,000. In the four following years it went steadily up until,
in 1834, it had reached 65,000.
By the Compromise tariff of 1833 it was provided that protection
should be gradually diminished until, in 1842, the country should
be replaced under a free trade despotism more complete by far than
that which had existed prior to 1828. As a consequence of this,
factories and furnaces ceased to be built, and the whole energies of
the country were given to the construction of roads and canals, by
means of which its products were to be enabled to reach the distant
market. Its credit stood very high, the few years of the protective
policy that had just then closed having enabled the government, in
1835, to pay off the last remaining portion of the public debt.
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Loans were therefore readily negotiated in Europe, and for a brief
period there existed a glare of prosperity well calculated to deceive
those who could not appreciate the great fact, that the raising of
raw products for distant markets tended to exhaustion of the soil,
and was the proper work of the barbarian and the slave, and of those
alone.
Three years only of the free trade system were required for pro-
ducing the crisis of 183T, to be followed by the crash of 1839, and
the almost universal bankruptcy of 1841 and 1842. During all
this period immigration was of the most fitful kind, rising as moneys
were borrowed abroad and roads were commenced at home, and fall-
ing as bankruptcies grew in number and half finished roads were
left to go to ruin ; but its annual average, notwithstanding the large
extension of internal communications, scarcely exceeded the figure
it had so rapidly attained in 1834, having been only 6T,500.
The two first years of the highly protective tariff of 1842, gave
an average of 81,000. Thenceforward immigration grew steadily
until, in 184*7 and 1848, it reached an average of 234,000, having
thus almost trebled in that brief period. The effects of the free
trade tariff of 1846 were just then beginning to be felt. Mines
thenceforward ceased to be opened, and mills and furnaces ceased to
be built. Labor was everywhere in excess of the demand, and im-
migration must rapidly have declined had not the discovery of Cali-
fornian gold opened up a new branch of industry, calculated to
operate largely on the minds of the miners and laborers of the
world at large.
The gold received at the United States Mint for coinage, in 1849,
amounted to $9,000,000, or more than had been received from all
the world in the six years from 1837-42. In 1850 it reached
$32,000,000, and in the following year it rose to $62,000,000. Im-
migration grew therefore rapidly, giving for the four years succeed-
ing 1850 the following figures : —
1851 . . . 408,000 1853 . . . 401,000
1852 . . . 397,000 1854 . . . 460,000
Up to that time gold washing had been very profitable, but thence-
forward it became from year to year more clearly obvious that a
continuance of the gold supply was to be obtained only by means
tending to render the laborer a mere machine to be used by the
capitalist. The demand for men for California was therefore at an
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end, while that for the Atlantic States and the Mississippi Yalley
tended steadily to decline, because of the constantly growing excess
in the supply of labor consequent upon the closing of mills, furnaces,
factories, and machine shops. Hence it is that the succeeding years
furnish us with the following diminished quantities : —
1855 . ,
. . 230,000
1^58 . .
. . 149,000
1856 . ,
. . 224,000
1859 . .
. . 155,000
1857 . ^
. . 271,000
1860 . .
. . 179,000
Small as are these figures, they would probably be diminished not
less than 25 per cent, were we furnished with those that would be
required for enabling us to ascertain the numbers of the disappointed
who returned to Europe, or who left California to seek fortune in
the more attractive gold deposits of Australia. At no period in the
history of the country, as I believe, had the average rate of interest
been so high as in the four years above referred to. At none had
there been so great a tendency to decline in the reward of the laborer,
and hence it was that immigration so rapidly declined.
The Southern rebellion having at length emancipated the North,
protection was re-established by means of that Morrill tariff, so much
denounced by the Post; that tariff to which we are indebted for
the fact that all Europe is now so largely engaged in manufacturing
machines of the most valuable kind, to be presented to us, in free
gift, by those who make them. While compelling us to give gold
for silks and cottons, the nations beyond the Atlantic are willing to
give us men and women who can not only spin and weave, but who
can make the machinery by means of which spinning and weaving
may be done, and at the same time reproduce themselves. Of all
foreign products, they are the most costly and most valuable, and
they are to be obtained at the cheap price of the steady pursuit of a
policy that will make a market close to the farmer's door, and thus
treble the price of his land.
Under the Morrill tariff system, immigration in the last year, as
shown in the records of the State Department, rose to 200,000, but
to this must be added at least 50,000 who had been attracted from
the British provinces, and of whom no record had been kept. In
the present year there has been a large increase, and from both
those sources ; but we are not yet in possession of all the figures re-
quired for enabling us to give them with any approach to accuracy.
Let us, however, go ahead with the protective system ; let us mani-
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fest a fixed determination to bring the consumer close to the pro-
ducer's door; and the day will not then be far distant when. the
numbers of foreigners seeking to take their place among us will be
as much in excess of those of present years as were those of 1847
in excess of 1842.
Protection looks to producing competition for the purchase of
labor, and for that of the rude products of the farm, and therefore
does it tend in the direction of freedom. British free trade seeks to
produce competition for the sale of both, and therefore is it that,
throughout the present war, it has shown itself the faithful ally of
the men who teach that slavery is the natural condition of the
laboring man, whether black or white.
The more numerous the mills and furnaces the greater is the
competition for the sale of paper, cloth, and iron, the greater is
the tendency towards reduction of their prices, the greater is the
competition for the purchase of labor, and the larger, as has here
been shown, is the number of persons who come here to aid, by the
consumption of sugar, tea, coffee, paper, cloth, and other commodi-
ties, in the maintenance of that great domestic revenue to which the
Government must in future look for payment of its annual expenses,
and for the ultimate redemption of its bonds. Half a million of
such persons coming here, and earning on an average but five dol-
lars a week, would receive an aggregate of wages amounting to
$130,000,000. Ten per cent, paid on this to the Government would
be $13,000,000. The Post would shut them out, it being an ''ab-
surdity'' to maintain on the statute book a law imposing a duty
whose only effect was that of causing foreign workmen to come
here and labor in our mills, eating our own food and wearing our
own cloth, when men could be found abroad who might, perhaps,
supply paper, iron, and cloth more cheaply, but certainly would
apply their wages to the purchase of the food of Germany, France,
or England, while contributing annually more than a tithe of their
earnings to the support of foreign governments. The more such
people came here, the smaller would be the tax of transportation
paid by the farmer, the greater would be the value of his land, and
the larger would be the amount of his contributions for the support
of both the State and Federal Governments. How many would
come under the system now advocated by the Post ?
But a few years since that journal told its readers that ''it would
b-e better for all of them [the sewing women] in the long run, to
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reduce wages to the famine point, so as to force all who had suffi-
cient strength into other employments." Now, it would close the
door to them in reference to that " other'^ one which makes demand
for so much female labor, the manufacture of paper. Seeking
some new ''employment'' they might, perhaps, find it in bleaching
shops, where they would be required to compete, wholly unprotected,
with British men, women, and children, who are, as shown in Par-
liament, obliged to work 16 to 20 hours per day, and under a tem-
perature so high that not unfrequently ''the nails in the floors be-
come heated and blister the feet of those employed in the rooms,
usually called wasting shops, because of the extraordinary cost of
life of which they are the cause.'' How much could our people,
subjected to competition with such as here described, contribute
towards the hundreds of millions of internal revenue of which we
now stand so much in need ? Not very much, as I think.
It is time that those gentlemen should awaken to the fact that
there is a harmony in all the real and permanent interests of the
various portions of society — the paper maker and the publisher—
the farmer and his customers — the people and their government.
When they shall do so they will, as I think, arrive at a proper
comprehension of the present "absurdity" of admitting foreign
paper at a duty of less, probably, than a sixth of its real value, and
the still greater one of freeing the foreign manufacturer from all
contributions for the support of government, while taxing our own
to the extent of probably ten per cent.
At the moment of writing this I find in one of our city journals
a paragraph, copied from the Fost, denouncing in regard to matches
the precise policy it has itself so steadily advocated as that required
to be pursued in reference to paper. It is as follows : —
"Those (matches) made in the country are taxed, by stamps, over
two hundred per cent, on the cost of manufacture. But at the same
session a tariff act has been passed imposing a duty, quite nominal
in comparison, on foreign matches. Now, Mr. Stevens's act^ ex-
pressly provides, that (section 169) when any imported articles
requiring stamps shall be sold 'in the original and unbroken pack-
ages' in which they were packed by the manufacturer, no penalty
whatever shall be incurred by selling them without stamps ! Of
course, manufacturers in Canada and Europe have only to pack
their goods in one or a few boxes, for family use, and they save the
tax. Match factories were at once removed into Canada, and for-
tunes have been made in five months' recess of Congress by simply
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adopting the means which our law took pains to provide for de-
feating its own objects and ruining our own manufacturers.^'
If it is wrong to "ruin our own manufacturers" by taxing their
matches while admitting those of Canada duty free, can it be right
to tax home-made paper while admitting free that furnished by the
great capitalists of Europe ? It seems to me that it cannot, but I
shall be glad to hear the argument of the Post in its defence. There
will, as I think, be more consistency in the movements of that journal
when it shall have arrived at the conclusion that protection is the
true and only road towards perfect freedom of trade.
In my next I propose to show what are, as they appear to me,
the duties of all of us who desire to see the Government sustained
not only throughout the war, but after peace shall again have
visited our land, meanwhile remaining, my dear sir,
Most respectfully yours,
HENRY C. CAREY.
Hon. Schuyler Colfax.
Philadelphia, December 29, 1864.
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THE PAPER QUESTION.
LETTER FOURTH.
Dear Sir : —
A few months since a bank of the New York Canal was swept
away for an extent of many miles, as a consequence of which navi-
gation upon that work was suspended, as I think, during several
weeks. The disaster was at the time attributed to the operations of
an active and industrious rat who had burrowed into the canal,
thus making way for a column of water to pass in the direction
from which he had come. At first very small, it rapidly increased
in size and force, and finally produced the disaster to which I have
referred.
Precisely such an operation as this it is that is now going on in
reference to the question of protection to the farmer in his efforts
for drawing the consumer to his side, and thus relieving him from
the present terrific tax of transportation. The first rat-hole was
made in March, ^63, when the paper-makers, after having been sub-
jected to an infinity of taxes, were deprived of all the protection,
little as it was, that had been granted to them by the tariff of '61.
The second was made at the last session of Congress, when the
taxes on home-made iron were almost doubled, while the duty on
railroad iron was largely diminished. The hole made in '63 is
now to be widened by means of the total repeal of the duty on
paper. That accomplished, the opponents of the Government will
find themselves emboldened to new efforts, and day by day we shall
see the rat-holes increase in number and in size, until at length the
whole work will be swept away, and with it all chance of any per-
manent maintenance of the Union, or of any future payment of its
debts.
The managers of the great combination that is now engaged in
the performance of a work regarded by the British people as so
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essential to their future greatness— the making of the rat-holes to
which I have referred— are to be found among the men who have
furnished the ships a;id men by which the blockade of Southern
ports has been evaded ; those who have fitted out the pirate ships
by means of which the flag of the Union has been almost entirely
driven from the ocean ; those who have, in and out of Parliament,
systematically endeavored to destroy the credit of our Government
while vilifying our people ; and those who see in the continued
maintenance of the Union the writing on the wall which warns
them that the day is close at hand when the people of Europe will
demand for themselves that exercise of the privilege of self-govern-
ment of which they have been so long deprived. They themselves,
as well as their mode of operation, are so well described in the
passage from a recent Parliamentary Report already cited, that I
cannot refrain from reproducing it on this occasion, believing, as I
do, that it should be read day by day, night by night, month by
month, and year by year, until all our people, male and female,
young and old, had become thoroughly penetrated with the convic-
tion, that the British proceedings of the past four years had been in
perfect harmony with all those of the previous half century, and
that if they would not be made mere '' hewers of wood and drawers
of water'' for British capitalists, they must learn to combine among
themselves for the adoption of measures of resistance. It is as
follows : —
'' The laboring classes generally, in the manufacturing districts of
this country, and especially in the iron and coal districts, are very
liiitle aware of the extent to which they are often indebted for their
being employed at all to the immense losses which their employers
voluntarily incur in bad times in order to destroy foreign competition,
and to gain and keep possession of foreign markets. Authentic
instances are well known of employers having in such times carried
on their works at a loss amounting in the aggregate to three or four
hundred thousand pounds in the course of three or four years. If
the efforts of those who encourage the combinations to restrict the
amount of labor and to produce strikes were to be successful for any
length of time, the great accumulations of capital could no longer
be made which enable a few of the most wealth'^ capitalists to
overwhelm all foreign competition in times of great depression,
and thus to clear the way for the whole trade to step in when prices
revive, and to carry on a great business before foreign capital can
again accumulate to such an extent as to be able to establish a com-
petition in prices with any chanoe of success. The large capitals
of this country are the great instruments of warfare against the
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competing capital of foreign countries, and are the most essential
instruments now remaining by which our manufacturing supremacy
can be maintained ; the other elements— cheap labor, abundance of
raw material, means of communication, and skilled labor — being
rapidly in process of being equalized. '^
Two centuries since, England sent her wool and her corn to the
people of the countries on the Khine, and took her pay for them in
cloth and iron. To her it was a most unprofitable trade. To the
Germans it was a most profitable one; so profitable that all Ger-
many wondered at the stolidity of a people who could tolerate its
continuance. '' The stupid Englishman,'' as then was said, '' sells
the skin of a rabbit for a sixpence, and buys back the tail for a
shilling." That, my dear sir, is precisely what we have so long
been doing — selling cotton at three pence a pound, and buying it
back at a shilling an ounce ; and giving a bushel of corn for half a
dozen pence, the pence themselves to be paid in the form of ounces
of corn combined with pennyweights of the three-penny cotton.
That sort of taxation it is that " the great capitalists" of England
the men to whom we are indebted for the prolongation of the
war, for the expenditure of hundreds of millions of treasure, and
the destruction of hundreds of thousands of lives — are determined
shall be maintained in all the future.
What are the measures by the aid of which it is that they propose
to compel us to its maintenance ? To obtain an answer to this
question, it is needed that we study a little of the history of the
past. British free trade had, in 1842, so far impoverished our
people that they were wholly unable to contribute to the support
of Government, as a consequence of which many of the States had
been driven to repudiation, and the National Treasury had become
utterly bankrupt. That state of things it was which gave us, in
the passage of the Protective Tariff act of 1842, a new Declaration
of Independence. Under it, in less than half a dozen years, there
was produced a change such as, to that date, had had no parallel in
the history of the world. In that brief period the consumption
of coal, iron, and lead was trebled, while that of wool and cotton
was doubled. Furnaces and mills were built, labor was everywhere
in demand, immigration grew with great rapidity, the public revenue
became larger than was needed for meeting all the wants of Govern-
ment, repudiation passed away, and prosperity once more reigned
throughout the land. That, however, not suiting the '' great capi-
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talists" above referred to, proprietors of British furnaces and British
mills, large sums were raised in 1846, to be so used here as to
bring about a change.. That they were so used in the Senate of
the United States, there is no reason for the smallest doubt. By
their aid the free-trade tariff of 1846 was made the law of the land,
and from the date of its enactment mills and furnaces ceased to be
built until California came with its golden treasures to stimulate
our people temporarily into action. That tariff lasted eleven years,
its existence having been terminated by the still more free-trade
tariff of 185T, whose passage proved to be the signal' for the crisis
of that year which swept away, by thousands, the makers of paper,
of cloth, of iron, and of a great variety of commodities for which
we became thereafter dependent upon the "great capitalists^^ of
Britain.
In carrying on this British '' warfare" against '' the competing
industry of other countries," the means used are very various, the
object to be accomplished being, however, always that of carrying
into full effect Lord Brougham's great idea of ''destroying," at what-
soever loss, "foreign manufactures in the cradle." The commence-
ment of any new branch of industry has proved to be, and that, I
believe, invariably, the signal for an inundation of our markets by
goods to be sold at any price until the danger of American compe-
tition should have been dispelled. A single case of this, the evidence
of which is now before me, may here be mentioned. Ten years
since, the price of rough plate glass being then $2 25 per foot,
several factories were started, and with the fairest prospects of the
most complete success. Forthwith vast quantities were sent here,
and the price was reduced to 15 cents. As a necessary consequence
our factories ceased to work, their owners were ruined, the '' great
capitalists," owners of millions, kept "possession of the foreign
market," and prices returned again to the point at which it suited
the millionaires to hold them. Cases of a similar kind might readily
be produced in reference to numerous branches of manufacture.
The grand secret, however, that one which can at will be made
available in reference to every branch, is that which manifests itself
in the production of agitation. These men know well that capi-
talists are timid, and that past American experience is such as
to warrant the extremest caution. When, then, at a commission
of five per cent., they employed Messrs. Ashmun, Yinton & Co.,
during a period of several years, to agitate for the abolition of all
3
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duty on railroad iron, they knew that their objects would be fully
attained even without the aid of legislation. They knew full well
that while that agitation should be continued no man would be so
insane as to risk his fortune in a furnace or a rolling-mill. When,
now, they use the publishers of books and newspapers for the pro-
duction of agitation in regard to paper, they have in view that they
thereby not only stop the building of paper-mills, but also excite in
the minds of our people the strongest doubts in reference to the
maintenance of protection in regard to cottons, woollens, and every
other department of manufactures. As the battle-cry of Danton
was found in the words, de Vaudace, de Paudace, et toujours de
Vaudace, so is theirs found in those of agitation, agitation, and
always and evermore agitation, for the accomplishment pf the great
purpose of crushing out all foreign competition for the purchase of
the fruits of the earth, and thus compelling all the farmers and
planters of the earth to sell their products in Great Britain, and
there to make their purchases. To that unceasing agitation it is
that we stand indebted for the waste of life and treasure that has
been caused by the present great rebellion. To that it is that we
are indebted for the fact, that we have been so long and so steadily
engaged in selling to our British friends, those friends who have
so consistently aided in the maintenance of the rebellion, rabbit
skins for six pence apiece, and taking our pay in rabbit tails at a
shilling.
If we are ever to do otherwise ; if we are to pay the interest of
our debt ; if we are at any future time to provide for payment of
the debt itself; if we are ever again to witness a resumption of
specie payments; if we are to have any permanent maintenance
of the Union ; if we are ever to attain that position among the
nations of the world to which our vast natural resources and the
extraordinary development of mind among our people so well entitle
us ; if we are to do our duty to ourselves, to the world at large,
and to the Great Being from whom we hold a power for the ad-
vancement of the whole human race that is great almost beyond
conception; we must put a stop to this agitation. We must do that
which will inspire in the minds of timid capitalists, both home and
foreign, that confidence which will lead them to apply their means
to the development of the wonderful wealth of fuel and of ores of
every kind which now lies hidden beneath the soil of almost every
State of this great Union. The more that this shall be done, the
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greater will be the demand for labor ; the stronger will be the tend-
ency towards emigration from the shores of Europe; the greater will
be the demand for the cotton of the South and the cotton goods of
the East, for the fish of the Atlantic coast and the pork of the
Mississippi valley ; the more rapid will be the growth of that inter-
nal commerce so much required for binding together the different
portions of the Union ; and the more perfect will be the power of
our people to furnish the contributions required for the maintenance
of the Government to which they will then be indebted for the
blessings that have here been named.
The amount required for the support of city, county, State, and
Federal governments, and payment of interest on their various debts,
cannot be estimated at less than $500,000,000. Of this perhaps
$70,000,000 may be obtained at the Custom House. That amount
can scarcely be very much exceeded, as it requires an import of little
less than $200,000,000
To this add—
For payment of interest on our foreign debt, and
dividends on stocks held abroad — . . . 30,000,000
For expenses of absentees, temporary or permanent — 40,000,000
And we obtain a total of $270,000,000
This is more than we shall be able to pay until cotton, rice, tobacco,
and naval stores shall once again take their places in our list of
exports. Until now, the earnings of our ships aided in paying for
foreign merchandise, but now the balance is against us, and to such
an extent as must make a considerable addition to the above amount.
To the Internal Revenue, therefore, must we look for little, if any,
less than $450,000,000. To the enforcement of protection we must
look for its enlargement, and thus it is that now, more than ever,
we are to look to the tariff as the means of raising revenue. The
more mills we build, the more mines we sink, the more water-powers
we improve, the larger will be the value of land, and the larger will
be the revenues of counties and of States. The greater the variety
and extent of our manufactures the more numerous will be the
exchanges, the greater will be the value of shops and warehouses,
and the larger will be the revenues of towns and cities. The greater
the quantity of commodities produced the larger will be the contri-
butions of manufacturers towards the Federal revenue. The greater
the demand for labor the higher will be wages, and the greater the
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consumption of tea and coffee, rice and sugar, to the great advan-
tage of that revenue. The larger the reward of labor the greater
will be the immigration of laborers, to the great advantage of the
owners of the land, and of the men by whom it is tilled. The
nearer the market to the farmer the richer will he grow, and the
greater will be his power to make, without inconvenience to himself,
contributions for the support of the governments of the State and
of the Union.
It is the reverse of all this, however, that is desired by the
''wealthy capitalists'^ of Europe. They wish to separate the pro-
ducer and the consumer, and thus to increase to the utmost the tax
of transportation. They desire that mills and furnaces shall not be
built. They would have our vast mineral wealth remain unde-
veloped. They would compel us to carry rags and corn to England,
to be returned in the form of paper. They would have the price of
labor kept down to the "famine price," and thus destroy the exist-
ing inducements to immigration. They would, if they could, drive
the government into bankruptcy, and thus forever destroy all hope
for any permanent maintenance of the Union.
To that end, they would give us just such agitation as is needed
for alarming the great and little capitalists, and preventing the
extension of manufactures of any and every kind. The instruments
of whose services they avail themselves are —
I. Their own agents, the men in whose hands has now centred
nearly the whole business of importation, and who generally succeed
in passing their goods through the Custom House at far lower rates
of duty than would be paid by our own citizens :
II. Consumers who allow themselves to be dazzled by the idea of
obtaining, for the moment, goods at low prices, and do not see that
low prices abroad are a consequence of that American competition
for the sale of similar commodities, in the destruction of which they
allow themselves to be engaged :
III. Politicians covetous of the spoils of office, and ready,
Samson-like, to pull down the pillars of the temple, if by so doing
they can secure the attainment of their ends.
In the hands of men like these — honest men who suffer them-
selves to be deceived, and dishonest men who desire to deceive
others— it is, that "the wealthy capitalists'' of England place "the
great instruments of warfare against the competing capital of other
countries," to be used in the West and the East, in the South and
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the North, for the maintenance of that agitation which they see to
be so much needed. So long as it is kept without the walls of
Congress, it does but little harm. When, however, it reaches that
body, and when it is thus made necessary for the makers of paper
and cloth, iron and steel, to dance attendance, year after year, upon
Congressional committees — seeing the sword always suspended over
their heads by a single hair, and witnessing always how slight is
the perception of many of their members of the importance of the
questions to be decided, how trivial the arguments that are brought
to bear upon their decisions— it becomes a great national grievance,
demanding a remedy that shall likewise be national, and that shall
interest the whole of the right-minded and honest people of the
country in its application.
In no other country can such difficulties exist. Throughout Eu-
rope, and especially in England, the arrangement of revenue laws
is the business of specially constituted bodies, with which the legis-
lature readily concurs. With us it is wholly different, each particular
portion of a bill having to be examined by men under the influence
of local ideas of interest, themselves the result of foreign agitation,
and conclusions being arrived at on one day of the discussion that
are in direct hostility with those which had been adopted on the
preceding one. As a consequence of this, the Executive is frequently
compelled to affix his signature to bills of the highest importance,
much of which he regards as wholly at war with the national
interests. For this no Administration can provide a remedy, and
this foreign agitation, with all its tendency towards destruction of
confidence in the future, must be continued until the people them-
selves shall furnish one. Erom what portion of the people, how-
ever, can it come ? The poor women now employed in paper-mills,
and likely to see themselves sent abroad to seek ''other employment'^
in cities in which the remedy for their distresses is, according to the
Post, to be found in the reduction of wages to ''the famine point,''
can do nothing towards it. The workmen employed about mills
and furnaces that are likely to be closed are equally powerless.
The farmers, seeing themselves about to be deprived of the market
hitherto furnished by the mill or furnace, are helpless for resistance;
while "the wealthy English capitalist," as we have seen, is all-
powerful for assault. Whence, then, can resistance come? To
what quarter may we look for quieting this unceasing agitation, and
for restoring confidence ? To the men through whom the war upon
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our people is made. They, and they alone, have power that, if
properly directed, will enable the Government to put down agita-
tion, and to establish and maintain such a revenue system as is
now so much required.
The daily production of paper is equal to the consumption, and
nothing more. The withdrawal of the producers from the market
would have the effect of teaching consumers to respect their neigh-
bors' rights. Would such withdrawal be justified ? Not only so,
but it would be difficult, in my opinion, to justify the former if they
failed to address the latter in something like the following terms: —
'' Gentlemen: Nearly four years have now elapsed since the abdi-
cation of Southern Senators and Representatives gave once more to
the people of the North the power to assert their rights. Among
the earliest measures consequent upon that abdication was a reduc-
tion into law of the great idea of the approximation of consumer
and producer, so enthusiastically adopted by the Convention which
made the Chicago Platform. On that occasion the paper producer
was restored to the position he had occupied under the British free-
trade tariff of 1846, and nothing more. Shortly after, the closing
of Southern ports so far cut off the supply of paper material as to
make it doubtful if the needed supply of paper itself could at all
be furnished. Since then, our best efforts have been given to the
utilizing of other materials, and much, if not even all, of our profits
has gone in that direction. So untiring have been our exertions,
and so successful have they been, that now, notwithstanding a rise
of wages that is wholly without a parallel — notwithstanding a
duplication, even where not a triplication, of the cost of every
article we use — and notwithstanding the imposition of taxes, direct
and indirect, but little short of the duty on the foreign product —
we are still enabled to supply you at such prices as wholly forbid
the importation of paper from abroad.
''While doing this, we have given support to 50,000 people who
might otherwise have been unemployed. We have paid such w^ages
as have enabled them to contribute largely to the support of Govern-
ment. We have made a market for many millions of dollars' worth
of rags, coal, iron, and other commodities, the producers of which
have also made large contributions in the same direction. By fur-
nishing a market for labor, we have contributed our full share
towards making the country attractive to the millions of Europeans
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who desire a change of homes ; aud have in this manner aided in
bringing many hundreds of thousands of foreigners to consume the
produce of our fields, while engaged in opening mines, building
houses, or clearing and making farms for their children and them-
selves to cultivate.
"Feeling that we have done our duty, both to you and the
Government, we regret now to have to say, that the treatment we
have received at your hands has scarcely been worthy of your general
reputation as men of business, and as Americans. Prompted by
' the wealthy capitalists' of Europe, you have been engaged in an
agitation for the destruction of a manufacture that gives large sup-
port to the Government, and have thus caused heavy loss to us,
while involving in utter ruin some of the largest and most respect-
able of the producers of the commodity you so much need. You
have thus made of yourselves allies of the men who have furnished
the means, the money, and the ships that have driven American
commerce from the ocean. Like them, you are making war on the
public revenue of the country, and should it prove that agitation
had in our case been followed by success, further agitation in refer-
ence to other branches of industry must be looked for, each in suc-
cession resulting in greater loss of revenue, until at length the
Government must become bankrupt, and the Union must present to
the world a scene of utter chaos, farmers, manufacturers, and traders
becoming involved in one common ruin.
''Your power to make this war on the general industry of the
country is wholly derived from us. Without our aid it cannot longer
be prosecuted. Such being the case, we should deem ourselves guilty
of positive crime were we to grant you further aid. So believing,
we desire now to notify you, that at the close of a month from this
date our mills will stop, and you will then be entirely at liberty to
obtain, discharged of any duty, and at a cost to the public revenue
of many millions annually, the cheap paper you so much desire.
'* Should you think it desirable to engage in the manufacture of
an article that is to pay ten or twelve per cent, to the Government
if made at home, while coming from abroad free of all such charge,
we shall be ready to sell to you our mills, and think you can be
assured that they may be purchased at what can be shown to have
been their actual cost. Should you fail to accept this proposition
you will probably find yourselves, and that at an early day, enabled
to judge of the extent to which American competition for the sup-
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ply of paper has tended to reduce its price generally, and thus to
further the cause of civilization throughout the world.
Yours respectfully,
A. B.
CD.
E. F.^^
The view above presented is, as I fully believe, a perfectly accu-
rate one, and I cannot but hope that the men who are now being
persecuted may manifest the possession of both the patriotism and
the resolution required for adopting the course of operation that
there is indicated. If the country is to prosper — if the Government
is to be sustained — if the Union is to be maintained — it is by means
of a policy tending to the approximation of the producer and the
consumer, and to the relief of the farmer from the oppressive tax
of transportation, and by that alone, that those great and essential
ends are to be attained.
The real payers of English taxes are the people of the countries
that supply the raw materials of manufactures, and buy them back
again in a finished form — those who sell the rabbit skin for a six-
pence and then repurchase the tail for a shilling. The consequences
of this are seen in the fact, that all such countries, poor, weak
and despised, are compelled to submit to the dictation of the very
people whom they are thus compelled to support. Protection
against this tyranny we have at length obtained, and the result is
seen in the fact, that our people are now enabled to contribute to the
support of Government, and to do so with ease, tens of millions,
when before they could with difficulty contribute the millions that
were required. This, however, does not suit *'the wealthy capital-
ists'^ of Britain, and therefore do we find them tempting the con-
sumers of paper and of iron to the work of opening holes in the
tariff, well knowing that one which in the outset was large enough
to pass only the body of a rat will very speedily become sufficiently
large to pass that of an elephant. This must be resisted, and if the
paper-makers shall now employ to its full extent the power that is
in their hands, they will thereby earn for themselves the thanks of
every patriot in the nation ; and of all who with me believe that
there is a way to outdo England without fighting her — a peace-
ful, pleasant road towards that thorough independence which shall
enable us to respect ourselves while commanding the respect of the
other nations of the world.
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In another letter I propose to ask your attention to some facts
concerning the iron manufacture, and meantime remain, my dear
sir, with great regard,
Yours respectfully,
HENRY C. CAREY.
Hon. Schuyler Colfax.
Philadelphia, Jan. 2, 1865.
Note. — Just as this letter is going through the press I find in the New
York Herald an article on the subject, from which the following is an
extract : —
" There is a movement on foot to induce Congress to repeal the duty on
paper. This movement originates out West, and with the editors of
republican papers. Some time ago a number of these editors — princi-
pally of Chicago and St. Louis papers — met and made their arrangements
in the usual way to influence Congress on this subject. They adopted
resolutions, appointed committees, delegates, and so on. Their resolutions
denounced the duty as onerous to publishel'S and not beneficial to the
Treasury ; and their committees and delegates were sent around to influ-
ence the press at large, to buttonhole Congressmen and other influential
persons, and in all ways to make as much outside pressure as possible.
We have been visited on the subject, and were at first glance disposed to
aid in the movement, but on a little reflection we are opposed to the whole
thing. We are in favor of the duty, and if Congress is disposed to in-
crease it to one hundred or even five hundred per cent, it will be quite
agreeable to us.
" In our opinion the Western editors look at this subject through a pin-
hole, and, consequently, only see a very small part of it. They never
consider the subject in any light save that of their own particular interest,
and, consequently, they do not understand it at all. They see that the
price of paper is high, and they put down their heads and rush at the duty,
which they suppose to be the cause ; but they rush in the wrong direction.
The high price of paper is not in consequence of the duty, and an import
duty cannot have any but the most temporary influence on that price.
Import duties cannot have any permanent eflect on articles that can be
produced here of a satisfactory quality. If an article can be made here
as well as in foreign countries heavy import duties will only aflfect the
place where it is made. Import duties on such articles merely stimulate
domestic manufacture. But, says the man who looks through the pinhole ,
import duties also protect domestic manufacture, and the high duty that
makes the imported article dearer also makes the domestic article bring
a higher price. This is' not true. Import duties give the market to the
domestic product, and the price of the domestic product is regulated, not
by that fact, but by demand and competition. If the price of paper is
very high, and the demand is great, paper manufactories will spring
abundantly into existence wherever capital seeks investment, and prices
will find their natural level."
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THE IRON QUESTION.
LETTEE FIFTH.
Dear Sir: —
Of all the metals there is none that, in its character of an instru-
ment to be used for facilitating exchanges, does so much as is
done by gold in promoting that combination of effort which is the
essential characteristic of civilization. It is in that capacity only,
however, that it performs such service. Coming to the hands of
men ready for use, it makes little demand for combination in its
preparation, the golden particles found in the miner's pan being
almost as fully fitted for man's service as are the large pieces sent
abroad from the mints of this city or of London.
Widely different is it with regard to that greatest of all metals
by help of which we cultivate our fields, mine our coal, build our
houses, and plate our ships. Coming to us in combination with an
almost infinite variety of other materials, it requires all the aid that
science can afford to make it fully available for human purposes.
Century follows century, each in succession casting new light on its
various properties, and with each of them is produced a power for
greater combinations of effort, and a necessity for their existence.
Thus promoting association it is the great civilizer, and therefore is
it that in the extent and growth of its use we find the truest standard
by which to test the existence and the growth of civilization. That
admitted, and it cannot be denied, we may now proceed to inquire
what has been the extent of its use among ourselves, and how far
its several stages of growth and decline have been attended, on the
one hand by peace and harmony at home, accompanied by growing
steadiness of the societary movement ; and, on the other, by those
frightful crises by which that movement has so often been arrested,
and which can be regarded only as the evidences of growing bar-
barism.
Forty years since, our annual product of this greatest of all
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metals did not exceed 50,000 tons. Under the semi-protective tariff
of 1824 there was a steady increase, but it was not until after the
establishment of the thoroughly protective tariff of 1828 that the
manufacture attained any large development. By 1832 the pro-
duct had reached 210,000 tons, and there was then every reason to
believe that in a brief period the whole demand would be supplied
at home. Prosperity then reigned throughout the land. Public
and private revenues were large, and the national debt was in course
of rapid annihilation. That, however, not being the state of things
desired by ''the wealthy capitalists'' of England, railroad managers
were set to work in and out of Congress, and railroad bars were
made wholly free, while the duties on other commodities were
left in a great degree unchanged. Shortly after this, however,
agitation succeeded in producing a total change of system, the tariff
of 1833 having provided for a gradual diminution of all duties,
those on iron included, until, in 1842, they should stand at a dead
level of 20 per cent. Thenceforward the building of furnaces and
mills almost wholly ceased, the '' wealthy English capitalists'' having
thus succeeded in regaining the desired control of the great Ameri-
can market for cloth and iron that had been so nearly lost to them.
As a consequence of their triumph there ensued a succession of
crises of barbaric tendency, the whole terminating, in 1842, in a
scene of ruin such as had never before been known, bankruptcy
among the people being almost universal, the banks throughout a
large portion of the country being in a state of suspension, States
being in a condition of repudiation, and the national treasury being
wholly unable to meet its small engagements. Only seven years
before, under protection, it had paid off*, to the last dollar, the debt
of the Revolution.
In 1832, as has been shown, the domestic production of iron
having risen to 210,000 tons, civilization was rapidly advancing,
with growing power among the people to contribute to the sup-
port of Government. Ten years later, with a population one-
third greater, the total production of iron being but 230,000 tons,
we find a growing barbarism, attended with corresponding decline
in the power of the people to pay for maintenance of the trivial
fleets and armies that then were needed for self-defence. Such was
the result of the employment by British capitalists of that ''great
instrument of warfare against the competing capital of other coun-
tries," by means of which they have thus far succeeded in rendering
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the Declaration of Independence, issued in 11^6, a mere form of
words, and so destined to remain until our people shall fully learn
that combination for our subjugation needs to be met by combina-
tion for self-defence.
Universal distress producing a universal demand for remedy, it
was furnished by the establishment of that highly protective tariff
of 1842, under the influence of which, in less than half a dozen
years, the production of iron was carried up to 800,000 tons, and
the total consumption of foreign and domestic to 900,000. Six
years previously, under British free trade, it had been only 300,000.
Here was evidence of advancing civilization, and it was accompanied
by that higher evidence which was furnished by the facts that indi-
viduals, banks, and States resumed payment of their debts, while
the treasury was enabled not only to meet the usual demands upon
it, but also to provide, and that without the slightest difficulty, for
the expenses of the war with Mexico. Throughout this period
there was no excitement, nor was there any crisis. All was peace
and harmony, and everywhere in the land there was evidence of
rapidly advancing civilization.
The proverb says most truly that '' you may bray a fool in a
mortar, yet will his foolishness not depart from him." Never, how-
ever, has its truth been more fully proved than in these United States.
Their people had been ''brayed" in the British free trade ''mortar"
in the terrible period from 1815 to 1825. They had been restored
to perfect health in the protectionist period from 1825 to 1835.
They had again been "brayed," and to an extent that till then
had not been paralleled, in the years from 1835 to 1842. Pro-
tection had again restored them in the brief period from 1842 to
1846 ; yet did they remain so "foolish" as to prove themselves once
again open to the blandishments of their excellent friends beyond
the ocean, "the wealthy capitalists" of Britain, who had been en-
riched by means of buying their rabbit skins at sixpence each and
then reselling to them the tails at a shilling, and who now found
themselves in danger of wholly losing the "foreign markets" they
had so long labored to secure. As usual, agitation was recom-
menced. British agents, with stocks of cheap British goods, were
sent to Washington, and the halls of the Capitol were granted to
them for the exhibition of their wares. Large sums were raised in
England, and politicians here were subsidized. Estimates were
furnished to the Senate, in which it was shown that the taxation
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imposed bj the tariff was so oppressive that a ton of nails which
could be bought for $90, really cost the purchaser $105 more than
it would have done under a free trade system ; and that a pound
of Missouri lead, that could then be bought in New Orleans for
2| cents, actually cost the consumer three cents more than he would
have had to pay had he been permitted to get his lead free of duty
from Spain or England. Such were the ''instruments of warfare'^
used on that occasion for beating down the system under which the
country had so rapidly recovered from the effects of the free trade
tariff of 1833. Such were the frauds by means of which the tariff
of 1846 was forced upon a country that had already, in the short
period of thirty years, twice been ''brayed'' in the free trade "mor-
tar," and twice had found the effects thereof in an almost entire
stoppage of the societary circulation, and an almost absolute bank-
ruptcy of the farmers, traders, bankers, and manufacturers of the
country.
Nominally, that tariff came into operation at the end of 1846.
Keally, it became operative in the summer of 1848, the Irish famine
of 1841 having produced a state of things, both abroad and at
home, that much delayed. its destructive action. From that moment
furnaces and rolling mills went gradually out of action until, in 1850,
the quantity of iron produced had fallen to less than 500,000 tons.
Was the deficiency made up by importation ? It was not, the im-
port of that year having exceeded that of 1846 by only 270,000.
The whole consumption was, therefore, little more than previously
had been the domestic product alone. Nevertheless, our popula-
tion had then increased but little less than ten per cent. We
see thus, that while consumption advances under protection at a
rate five times more rapid than that of population, it declines when-
ever the "wealthy capitalists" obtain the control of the "foreign
markets" to which they look with such gfeat anxiety, and for which
they are always ready to use that great "instrument of warfare"
that we, in our marvellous folly, have placed in their hands, by
means of selling skins for sixpence and taking our pay in tails at
a shilling.
The duty under the tariff of 1842 being specific, it underwent no
change when prices fell in England. To its full amount, therefore,
it constituted an obstacle to importation that it was for the
British iron master to remove, paying the cost of removal out of
his own pocket and into the Treasury of the Union. As a conse-
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quence of this the import of rails in the fiscal year 1846--'7, when
the country was so highly prosperous, was but one-half as great as
the average of the two years preceding the passage of the act of
1842; whereas, the domestic production had risen to 41,000 tons,
or little less than double the number imported in those thoroughly
free trade years. The total consumption had more than doubled in
the short period which had then elapsed, and had thus given evi-
dence that thorough protection and civilization were marching hand
in hand together.
The tariff of 1846, with its ad valorem duties, came into opera*
tion on the first of December of that year, the rate payable by iron
being 30 per cent. Fraudulent invoices reduced it, probably, to httle
more than 20 per cent. American competition had greatly lowered
the real British prices, as a consequence of which the amount paid
into the treasury by foreign iron and the freight from England
combined, during a period of several years, were less than the mere
cost of transportation from the furnaces of Pennsylvania to the city
of Boston. The "wealthy English capitalists'' now profited, and
to the fullest extent, of the opportunity thus afforded them ''to de-
stroy foreign competition and to gain and keep possession of foreign
markets." In 1849 and 1850 the quantity of foreign rails forced
on the American market amounted to more than 200,000 tons,
while the domestic production of those years averaged but 16,500,
although there then existed American mills capable of producing
nearly 10,000, and those iu a country in which eight years before
not a single rail had yet been made.
The furnace master found his market destroyed by the closing of
the rolling mill, and the owner of the latter found himself being
ruined by the liberal use that then was being made of those "great
instruments of warfare," by means of which the "wealthy capital-
ists" of England had so long been accustomed to annihilate "the
competing capital of other countries." In their distress they called
on Congress for help, but their cries were totally unheeded. British
iron, at the then freights, and almost free of duty, could be delivered
here, as then was shown, at $40 per ton; and railroad makers pre-
ferred to pay that price for the miserable products of British fur-
naces, to giving a sliding scale that would secure to the American
producer, for sound and excellent iron, the small price of $50, which
was all that then was asked. Closing their eyes to the fact that it
was to American competition for the sale of iron they had been
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indebted for the low prices of the British markets, they permitted
that competition to be almost annihilated, and the competitors to
be ruined. The fall of the domestic production from 800,000 tons
to less than half a million, produced a necessity for dispensing with
its use, or going abroad to purchase all the difference. Competition
for purchase in the British market grew as this necessity increased,
and therewith came the precise state of things so well described in
the Report to which I have so frequently referred — the whole British
iron trade having been "enabled to step in when prices revived, and
to carry on a great business' ' before their American competitors could
*' establish a competition in prices with any chances of success.''
With the discovery of California gold there arose a great demand
for railroad iron, and that demand was, for the first few years, sup-
plied almost entirely from British rolling mills, the railroad makers
paying $80 per ton, if not even more, when but a little before
they had refused to the domestic producer a sliding scale that would
have secured him in the receipt of $50. ,At enormous prices Britain
supplied us, in the four years 1851-54, with no less than a million
tons of railroad bars. The additional price paid in those years by
American road-makers, as penalty for permitting American compe-
tition to be crushed out, could not Ijave been less than $30,000,000,
all of which went into British pockets, and thus helped to prepare
the way for that new evidence of growing barbarism which was
furnished by the terrific crisis of 185t.
In that crisis very many of our iron producers were totally ruined,
and the ruin extended itself to all departments of industry connected
with this branch of manufacture. The demand for coal diminished,
and labor ceased to be required ; as a necessary consequence of which
immigration rapidly declined, while emigration to Australia, com-
bined with return of the many disappointed, withdrew from us pro-
bably one-fourth of all who then were led to seek our shores.
At the breaking out of the rebellion we had been for a whole
decade in the ownership of mines that had yielded gold to the extent
of more than $500,000,000, and yet we had not been able even to
pay our way with Europe. Our foreign debts were probably equal
to that sum in their amount. Our credit was so very low that there
existed little disposition to purchase further supplies of bonds. As
a consequence of this, the importation of railroad iron in the three
years 1858-60 averaged but 88,000 tons, and the total consumption
of iron, foreign and domestic, but little exceeded that of the closing
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year of that prosperous protective period which terminated in
184t-8. There is good reason for believing that it did not exceed
a million of tons, and yet in the period which had since elapsed our
population must have increased more than 40 per cent. Taking
then the consumption of iron as the test of civilization, we are pre-
sented with the following facts : —
In the six years which followed the passage of the protective act
of 1842 the consumption of iron trebled, while the population in-
creased but 20 per cent.
At the end of twelve years from the re-establishment of British
free trade, there was but a slight increase, although the numbers of
our people had grown 40 per cent.
Bad as was all this, it was but the preparation for those further
acts of barbarism which distinguished the close of 1860, and resulted
in a civil war that has cost the country hundreds of thousands of
lives, and thousands of millions of dollars. Seeking now to find
the real cause of that war, and of the destruction of life and pro-
perty of which it has been the cause, I would ask of you, my dear
sir, to read again the Parliamentary Report of the British policy,
and then to study carefully the following exhibit of the natural
advantages of an important portion of the country that now pre-
sents such a scene of devastation.
The great backbone of the Union is found in the ridge of moun-
tains which commences in Alabama but little distant from the Gulf
of Mexico, and extends northward, wholly separating the people
who inhabit the low lands of the Atlantic slope from those who
occupy such lands in the Mississippi valley, and itself constituting
a great free soil wedge, with its attendant free atmosphere, created
by nature herself in the very heart of slavery, and requiring but a
slight increase of size and strength to have enabled its people to
control the southern policy, and thus to have brought the entire
South into perfect harmony with the North and West, and with
the world at large. That you may fully satisfy yourself on this
head, I will now ask you to take the map and pass your eye down
the Alleghany ridge, flanked as it is by the Cumberland range on
the west, and by that of the Blue Mountain on the east, giving, in
the very heart of the South itself, a country larger than all Great
Britain, in which the finest of climates is found in connection with
land abounding in coal, salt, limestone, iron ore, gold, and almost
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every other material required for the development of a varied in-
dustry, and for securing the attainment of the highest degree of
agricultural wealth ; and then to reflect that it is a region which
must necessarily be occupied by men who with their own hands till
their own lands, and one in which slavery can never by any possi
bility have more than a slight and transitory existence. That done,
I will ask of you here to reflect what would be now the condition
of the Union had its policy for the last twenty years been such as
would have tended towards filling this great free soil wedge with
free white northern men — miners, smelters, founders, machinists —
workmen of all descriptions — who should have been making a market
for every product of the farm, with constant increase in the value
of land and labor, and as constantly growing tendency towards in-
crease of freedom for all men, whether black or white? Would not,
under such circumstances, power have made its way to the hills, and
would not iron, coal, limestone, and copper have been enabled to
dictate- law to the cotton kings — to the men who occupied on the
river bottoms, and lived at ease at the cost of those of their fellow-
men whom they bought and sold in the open market? Could we, by
any possibility, have witnessed the present extraordinary state of
things, had the policy of the country in reference to domestic and
foreign commerce not been directed by the ''wealthy capitalists'^
who are now so busily engaged in making rat-holes through the
existing tariff, very moderately protective as it is? Most assuredly
we should not. To them it is that we are indebted for our present
troubles and our debt, and o/them it is we should exact the payment
of it. That, however, we shall never do if we shall continue to sell
rabbit skins for sixpence and take our pay in rabbit fails for a
shilling.
Why have we so long continued so to do? Because, although
Independence was declared in 1^76, we have never pursued the
policy required for making the declaration any more than a mere
word of small significance. With slight exception we have been
governed by the great capitalists of Britain, and have pursued the
precise system that was advocated in England before the Revolution
as the one required for retaining the Colonies in a state of vassalage,
and thus compelling them to so make the unprofitable exchanges to
which I have referred. What was that system is fully shown in an
English work of much ability, published in London at the time
when Franklin was urging upon his countrymen the diversification
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of their pursuits, as the only road towards real independence, and
from which the following is an extract : —
"The population, from being spread round a great extent of fron-
tier, would increase without giving the least cause of jealousy to
Britain ; land would not only be plentiful, but plentiful where our
people wanted it, whereas, at present, the population of our colo-
nies, especially the central ones, is qonfined ; they have spread over
all the space between the sea and the mountains, the consequence of
which is, that land is becoming scarce, that which is good having
all been planted. The people, therefore, find themselves too nume-
rous for the agriculture, which is the first step to becoming manu-
facturers, that step which Britain has so much reason to dread.''
Why, my dear sir, should Britain have so much dreaded combina-
tion among her colonial subjects? Why should she so sedulously
have sought to disperse them over the extensive tracts of land
beyond the mountains ? Because, the more they scattered the more
dependent they could be kept, and the more readily they could be
compelled to carry all their rude products to a distant market, there
to sell them so cheaply, as we are told by another distinguished
British writer, ''that not one-fourth of the product redounded to
their own profit," as a consequence of which plantation mortgages
were most abundant, and the rate of interest charged upon them so
very high as generally to eat the mortgagor out of house and home.
In a word, the system of that day, as described by those writers,
was almost precisely that of the present hour. For its maintenance,
dispersion of the population was regarded as indispensable, and that
it might be attained, the course of action here described was recom-
mended : —
"Nothing can therefore be more politic than to provide a super-
abundance of colonies to take off all those people that find a want
of land in our old settlements ; and it may not be one or two tracts
of country that will answer this purpose : provision should be made
for the convenience of some, the inclination of others, and every
measure taken to inform the people of the colonies that were grow-
ing too populous, that land was plentiful in other places, and granted
on the easiest terms ; and if such inducements were not found suffi-
cient for thinning the country considerably, government should by
all means be at the expense of transporting them. Notice should
be given that sloops would be always ready at Fort Pitt, or as much
higher on the Ohio as is navigable, for carrying all furniture without
expense, to whatever settlement they chose, on the Ohio or Missis-
sippi. Such measures, or similar ones, would carry off the surplus
of population in the central and southern colonies, which have been
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and will every day be more and more the foundation of manufac-
tures.'^
Having studied these recommendations in regard to the mainte-
nance of colonial dependence, I will ask you now to study the work-
ing of the British free trade system, and satisfy yourself that its
advocates, the agitators of whom I have spoken, have been mere
instruments of our foreign masters — closing our mills, furnaces, and
factories, retarding the development of our great mineral treasures,
preventing the utilization of our vast water powers, and in this
manner scattering our people, in strict accordance with the orders
of those British traders against whom our predecessors made the
Revolution.
Having now brought up this review of the iron trade to the
period of the great rebellion, I propose in another letter to bring
it down to the present time, and then to show what are the mea-
sures by which we may be enabled to outdo England without fighting
her, and thus establish a real independence.
Yours, very truly,
HENRY C. CAREY.
Hon. Schuyler Colfax.
Philadelphia, Jan. 6, 1865.
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THE lEON QUESTIOK
LETTEK SIXTH.
Dear Sir : —
The preparation seems to have now been made for boring
another hole through the protective system that has recently been
so well established. This time it takes the form of a protest, of
course in favor of the public revenue, against duties on spool cot-
ton, under which, as we are told, ''foreign spinners are now suffer-
ing in their attempts to contend against these heavy odds whereby
importation is now stopped.'^ Large exhibits are made therein of
the quantity of gold that is thus prevented from passing into the
treasury, but not a word is said in reference to the important fact,
that, under the system which has thus far made us dependent on
Britain for that important commodity, we have never yet been able
to carry up our consumption even to the amount of six cents per
head of our population. Selling cotton at three or four pence
per pound we have been required to pay in gold, to the extent of
millions of dollars per annum, for pennyweights of it combined with
Russian and Egyptian corn, while the farmer of Iowa, unable to
find a market for his grain, has found it expedient to convert it into
fuel, and thus prevent its total waste. Here, as everywhere, we
have been favoring the policy of slavery and barbarism, limiting our
people to the raising of raw produce for the supply of distant
masters, by whom they have been required to give the whole skin
for a sixpence, receiving their pay in tails at a shilling. The
answer to all that is now said in regard to the opening of the new
rat-hole which is now proposed, is found in the words of the- ex-
cellent article from the Herald, a part of which was appended to a
former letter : " If the price is very lai^ge and the demand is great,
manufactories will spring abundantly into existence and prices
will find their natural level.^^ If the British manufacturers are
really suffering in the manner above described, let them transfer
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themselves and their machinery here ; let them bring their people
with them to eat the food of Illinois and Iowa in place of that of
Eg7pt ; let them do this and the price of their commodity will soon
be so far lessened that our consumption will rise to 20 cents per
head ; the Government will then receive, in the form of internal
revenue, an amount far greater than these foreign agitators ever
yet have paid at the custom-house ; and we shall then have made a
further step towards enabling ourselves to retain at home the gold
that we ourselves shall so much need when the time shall have
arrived for using the precious metals in the place of paper.
Having thus disposed of this new subject of agitation, the further
examination of the great Iron Question comes now next in order.
To British free trade it is, as I have shown, that we stand indebted
for the present civil war. Had our legislation been of the kind
which was needed for giving effect to the Declaration of Indepen-
dence, that great hill region of the South, one of the richest, if not
absolutely the richest in the world, would long since have been filled
with furnaces and factories, the laborers in which would have been
free men, women, and children, white and black, and the several
portions of the Union would have been linked together by hooks of
steel that would have set at defiance every effort of the '' wealthy
capitalists" of England for bringing about a separation. Such,
however, and most unhappily, was not our course of operation.
Rebellion, therefore, came, bringing with it an almost entire stop-
page of the societary movement, with ruin to a large proportion of
those of the men engaged in producing coal and iron who had still
continued to exist notwithstanding the heavy losses inflicted upon
them in the sad five years which had just then elapsed. More than
at any previous period the Government stood then in need of iron
in all its shapes, from the needle with which the poor sewing wo-
man makes the shirt, to the great sheet required for plating the
enormous ship of war ; and yet, such had been the extraordinary
policy of the country that, while fuel abounded rolling mills were
idle and furnaces were out of blast, and the machinery for the needle
and the plate had not as yet been permitted to take its place at any
single point over our extensive surface. As a consequence, poor as
was then our Government, and unemployed as were then so large a
portion of our people, we were compelled to send abroad for millions
upon millions of dollars worth of the machinery of war, and there
to encounter all the obstacles that could decently be thrown in our
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way by men who prayed openly for the success of the rebellion, and
who, almost at the instant of its first occurrence, had, by royal pro-
clamation, placed the rebel Government on a level with that which
their predecessors had, in 1^83, so unwillingly recognized. This
great adversity had, however, brought with it a remedy that, if now
properly applied, will cause our children and our children's children
to look back to the period of its occurrence as that in which there
had been an act of Providential interference in favor of a commu-
nity such as had had no precedent in the history of the world,
prompting, as it had done, men who for seventy years had wholly
controlled the action of the Government, to abdicate their seats and
leave the direction of affairs to those who represented the poor and
despised " mud-sills'' of northern States. So great an act of in-
sanity had never before been perpetrated by any body of intelligent
men, and, most fortunately, its perpetration occurred at the moment
when the public opinion of the North had been prepared to profit
of it.
That preparation had come as a natural consequence of the terrific
free trade crisis of 1851. Assembling in 1860, the politicians at
Chicago accepted most unwillingly that new plank of the platform
by which " protection to the farmer in his efforts for bringing the
consumer to his side" was incorporated into the Republican creed ;
and great was their surprise when they found that public opinion,
and especially the opinion of the great Mississippi Yalley, had left
them far behind. "We might have made it stronger," was the
exclamation of one of its chief opponents after he had witnessed
the enthusiastic applause with which it had been greeted. As yet,
however, it could be nothing more than a declaration of good inten-
tions to be carried into effect at some future time, the senatorial
power appearing then likely long to remain in the hands of men
who believed in human slavery as the comer-stone of all free govern-
ment ; in British free trade as the means by which slavery was to
be perpetuated and extended throughout this continent ; and in the
''wealthy capitalists" of England, as the firm allies by whose aid
their ambitious hopes were to be fully realized. To give prac-
tical effect to the new Declaration of Independence, it was neces-
sary that those men should abdicate, and happily for the North,
and for the world, abdication was not long delayed. Protection
then at once became the law of the land, and under circumstances
that should have tended to free forever the country from that agita-
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tion by means of which the British trader had so long controlled
the societary movement, and had, with so much profit to himself,
been enabled to fill the British treasury by means of taxes, direct
and indirect, upon nearly all the foreign exchanges that our poverty
had permitted us to make. Between skins at sixpence and tails at
a shilling — cotton at cents per pound and cotton goods at shillings
per ounce — corn at cents per bushel and wool and corn at dollars
per pound — there was a large margin for the British trader and his
superiors, and out of the taxes thus extorted have, to a large
extent, the British nation and its government been supported by
the people of these United States. Protection looked to the abo-
lition of this taxation. That it has done much in that direction is
proved by the great fact, that it has enabled us to contribute thou-
sands of millions of dollars towards the suppression of the rebelhon ;
that it has in so short a period given us a navy such as had been
so long required for setting at naught the declaration that '* not a
flag but by permission spreads ;'^ and that, notwithstanding all our
vast expenditures, the productive power of the loyal States is greater
at this moment than was that of the whole Union on the day on
which, less than four years since, President Lincoln assumed the
reins of government.
The need for iron soon became very great. Great, too, was the
disposition of iron men to exert themselves for the supply of the
wants the rebellion had now created. The Government had just then
pledged itself to stand by them in their contest for the market of
the world, at home and abroad, with the men who had so long con-
trolled " that great instrument of warfare'' by whose judicious use
their predecessors had so generally been ruined. The pledge was
accepted, and the results exhibit themselves in the facts : —
I. That the production of pig-iron has already been carried up
to more than 1,300,000 tons, and that it has been made certain that
large as is the quantity, it can with ease, provided that the labor
can be obtained, be trebled in the next seven years :
II. That the rolling-mills of the country have now a capacity of
nearly 700,000 tons, and that the only difficulty now standing in
the way of the production of that quantity of sheet and bars is the
one resulting from the scarcity of labor :
III. That the supply of railroad iron is now fully equal to the
demand, and can be increased to any extent that may be required :
lY. That the conversion of iron into steel has been so much ex-
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tended as to free us entirely from any further dependence on the
*' wealthy capitalists'' of Britain :
Y. That works, required for the conversion of steel and iron into
the various other machinery required for both public and private
uses have been so extended as to enable their proprietors to meet
the whole demand.
The industrial history of the world exhibits nothing at all com-
parable with what has here been done in regard to this great branch
of manufacture. That it might be done every man who previously
had been interested therein has been required to apply to the en-
largement and improvement of his machinery not only every dollar
that he could make, but, in very many cases, all that he could bor-
row ; and this they have done in the false confidence that consumers
of iron had at last so far profited of past experience as to have
become convinced that the way to have good and cheap iron was
to be found in the direction of stimulating competition for its
manufacture ; and not in that of annihilating American competi-
tion for its sale, while promoting competition for its purchaseixom
the "very men who had always used their power in the direction of
promoting agitation for the destruction of " foreign competition,"
and for enabling themselves to *' gain and keep possession of foreign
markets."
That it was a false confidence you will, my dear sir, see, after you
shall have accompanied me in a brief review of the proceedings of
iron consumers which it is proposed now to make. When you shall
so have done, you will, as I think, agree with me that it would be
difficult to find in the history of the world a case in which the pro-
verb given in my last had beeu more thoroughly applicable than
it now is in reference to the iron consumers of these United States.
Often as they had been ''brayed" in the British free trade ''mortar,"
their "foolishness" had not departed from them.
By the tariff of 1861 the duty on railroad iron was fixed at
$12 per ton of 2,240 pounds, being less than one-half of the
charge upon it as established by the tariff of 1842 — that one
under which iron generally was so cheaply furnished that the
total consumption of the country was in four years carried up
from 300,000 to 900,000 tons. It should have been placed at a
higher rate than this, and so it would have been but for the ex-
ceedingly absurd and stupid jealousy which prompts so many persons
to consider the iron manufacture the special property of Pennsyl-
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vanla. Iron ore abounds in more than two-thirds of the States of
the Union ; fuel, too, almost as much abounding as the ore demand-
ing to be smelted; and it is to the great credit of Pennsylvania that
her ironmasters have never in a single instance allowed themselves
to be influenced by the narrow idea, elsewhere openly expressed in
regard to other branches of manufacture, that it was needed to
''keep protection down, lest it might stimulate domestic compe-
tition.'' If there are any ironmasters in the country who can live
without protection, they are those of that State. They are the
men who have paid most dearly for their experience. To them the
country is indebted for the fact that this great branch of manufac-
ture, in nearly all its processes, is now ahead of Britain. Jhey,
however, know that Tennessee and Alabama, Missouri and Michi-
gan, Yirginia, Maryland, and Ohio, need protection; and they desire
that they shall have it, quite assured that in the wide extension and
general prosperity of the manufacture in which they are so well
engaged will be found the key to that universal prosperity which
enables men to extend their roads, to increase and improve their
machinery, and tx> do all those things that make demand for
iron and thus furnish proof conclusive of advancing civilization.
Least in need of it, they stand foremost in the demand for efficient
protection, asking it in the interest of the country at large, and not,
as is in so many other cases done, exclusively in their own.
Accepting the rate of duty that had been fixed, they went
promptly to work, and with the results that have been shown.
The time came, however, when it became necessary to establish a
system of Internal Revenue,. and railroad iron was then subjected
to a direct tax of $1 50 per ton, while upon coal and other com-
modities used in its production heavy duties were imposed. Incomes,
too, were required to contribute, the general rate of contribution,
by both the manufacturer and the receiver of income, being fixed at
tJiree per cent.
The war having thus produced a necessity for taxing both the
materials of manufacture and its products, it was deemed proper to
subject the foreign manufacturer to the payment of a like contribu-
tion, and duties generally were raised to the extent of five per
cent. To this, however, railroad iron was made an exception, the
addition having been limited to the precise amount of the direct tax,
$1 50 per ton, and no allowance whatever having been made for the
taxes on coal, lime, machinery, or incomes. Such, my dear sir, was
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the paltry spirit in which were met the men who were at that mo-
ment, in their efforts to meet the wants of the Government, mani-
festing a larger liberality than any other body of men that could
have been produced in the whole extent of the Union.
The necessity for further revenue becoming obvious, the last
session of Congress gave us a new excise law by means of which
pig metal was for the first time subjected to a tax, and that to the
extent of two dollars per ton, the tax on coal being at the same
time largely increased, and that on rails more than doubled, the
general effect being that of giving a tax on the rail itself amounting
to seven dollars per ton.
Tathis must now be added taxes on lime and other raw mate-
rials— taxes on machinery to a large amount — income taxes — taxes
on licenses — taxes on sales — taxes on freights — taxes on leases —
taxes on salaries — taxes on charters, notes of hand, and articles of
agreement — the w^hole of which, when added to the $t already ob-
tained, will give at least $8 50 as the contribution in these several
forms to be paid by each ton of railroad bars. — Adding now to this
the large increase, consequent upon the existence of the war, of
state, county, township, and borough taxes — the contributions for
obtaining volunteers and for maintaining their families, it will be
found that the amount, under this new law, furnished by each ton
of bars, for the maintenance of the contest, cannot be estimated at
less than $10.
Having thus shown what was the pressure brought by the
Government to bear upon the men who were giving all their time,
mind, and means to building up that- great manufacture on which
now rests the whole of our great societary machine, and upon whose
success or failure is dependent the whole future of this Union, I
propose in my next to show what were the measures at the same
time adopted by the Government for enabling them successfully to
compete with those "wealthy English capitalists^^ who were then
giving all their time, mind, and means to the work of vilifying our
people, destroying our credit, breaking our blockades, destroying
our ships, and in every other way aiding a rebellion whose success,
as they saw, could have no other result than that of reducing the
country to a state of complete dependence.
It is with great regret, my dear sir, that I make so many demands
upon your time and attention, but the question now to be settled is
one of so great importance that you will, I am sure, excuse me.
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When the present war shall have been closed there will be another
to be fought, and that one will be with England. By many it is
desired that it may be a war of cannon balls ; but it is not now with
such machinery that she chiefly seeks to fight us. It is in the Halls
of Congress she is to be met, and the machinery with which we
have successfully to meet her is to be found in the adoption of those
measures which shall enable us most speedily to profit of that inex-
haustible store of fuel and of ores that nature has placed at our
command. So believing, and hoping that all my countrymen may
soon be led to the conclusion that there really is a way to outdo
England without fighting her, I am, with great regard and respect,
Yours, very truly,
HENRY C. CAREY.
Hon. Schuyler Colfax.
Philadelphia, Jan. 9, 1865.
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THE lEON QUESTION.
LETTER SEVENTH.
Dear Sir : —
That the power to prosecute the war in which we are engaged
has been derived mainly from the Mining States, must be obvious
to all who take the trouble to reflect that for the force by which
our mills have been driven and our blockade maintained, and the
iron by means of which that force has been applied, the Union has
had to look almost entirely to the^mountains of Pennsylvania. But
for the energy with which the mineral resources of that State have
been developed the war could not have been maintained for even a
single year. To their further development, and to that of her sister
Mining States, the Union has now to stand indebted for its power
to collect the revenue by means of which its credit is to be main-
tained, its wars, present and future, to be carried on, and its debt
ultimately discharged. Failing to secure that development it must
itself prove a failure, absolute and complete.
Seeing this, and it is so clearly obvious that it would appear dif-
ficult that any should fail to do so, it might be supposed that coal
and iron, as the foundation upon which now rests, and must in all
the future rest, our whole societary movement, would, in these trying
times, and after the sad experience of the blessings of British free
trade, have been regarded as entitled to peculiar care. That prior
to the last Session of Congress they had not been so regarded, and
that, on the contrary, of the little that had been given by one hand
much had been taken away by the other, has been already shown.
That the movement since that time has been in the same unfortu-
nate direction, it is proposed now to show.
The total taxation of a ton of railroad bars, for the maintenance
of the war, cannot be taken at less than $10. Before the passage
of any tax law the duty had been fixed at $12, that having been the
smallest sum to which it had been possible to obtain the assent of
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tbe Mining States. Under the first tax law the charges of the
Government to the domestic producer may be taken as having been
not less than $3, while the additional payment required of the foreign
producer was limited to $1 50. Since then the former have been
more than trebled, and it would have been but just to carry up the
latter to the same extent, thereby compelling the British iron
master to pay $20. Instead of that, his contribution was reduced
to the point at which it had stood on the day on which Fort Sumter
fell. Such was the manner in which the decision of the Chicago
Convention was carried into effect in regard to a manufacture upon
the success or failure of which was wholly dependent the answer to
be given to the questions as to whether or not the Government was
to be sustained ; whether or not the interest on the debt was to be
paid ; whether or not specie payments should ever be resumed ;
whether or not the national debt should ever be discharged ?
It may, however, be said that the duty of $12 is payable in gold,
while the $10 of taxes are payable in paper, and such is certainly
the case. That difference now constitutes the sole protection to
this great branch of manufacture. When, however, is it to cease ?
Who can tell what time is to elapse before some enterprising
financier shall succeed in persuading the Government to the adoption
of measures tending to the sudden reduction, at any cost to the
people, of gold to par ? Such measures are, as we all know, now
advocated in some of the most influential Kepublican journals, and
they have, as I have good reason to believe, received the approba-
tion of men of the highest standing connected with the Administra-
tion. That they would be suicidal in their tendency cannot be re-
ceived as furnishing even the slightest evidence that they will not be
adopted, seeing that we have now before us evidence that gentlemen
connected with railroads have so entirely failed to profit by ex-
perience which should have taught them that the cheap British iron
of 1864 was but the trap by help of which they were to be made to
pay probably twice the price for just such iron, poor as it generally
is, in 1866. Time and again have they and their predecessors been
brayed in the British '' mortar,'^ yet has their " foolishness" not yet
departed from them.
The direct contribution of pig and bar iron to the revenue can
scarcely this year be taken, as I think, at less than $5,000,000. Add
to this the taxes on coal, lime, transportation, incomes, &c. &c. &c.,
and we shall obtain probably double that amount. This would
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seem to be a large sum to put at risk, and yet it is as nothing com-
pared with the extent of risk that is to be incurred, the coal and iron
trades of the country constituting the foundation upon which this
day rests our whole system of internal revenue. Break them down,
as they will be broken if the system be not promptly changed,
and the Government will, before the lapse of even a single year,
become so utterly bankrupt that its certificates of indebtedness will
have little more value in the public eye than have this day those
of the so-called Confederacy of the Southern States.
To those who may entertain any doubts on this subject I would
recommend reflection on the following facts : —
I. The consumption of iron is the test of growing civilization,
strength, and power.
II. That consumption dojibled in the protective period from 1828
to 1834, our numbers meanwhile increasing but 20 per cent.
III. Eight years later, in 1842, with British free trade and an
increase of numbers amounting to 30 per cent., the quantity con-
sumed had made scarcely any progress whatsoever.
III. Thence to 1848, under protection, with a growth of popu-
lation of but 20 per cent., it trebled — having already reached the
large amount of 900,000 tons.
lY. Twelve years now follow, spent under the British free trade
system, giving us — an increase of population to the extent of nearly
40 per cent. — the great discovery of California gold with correspond-
ing increase in the necessity for internal intercourse — and an increase
in the consumption scarcely, if at all, exceeding 12 per cent.
y. In the three years that have now elapsed since the Morrill
tariff became fairly operative, the population subject to it has been
less by a third than that of 1860, and yet the consumption now
exceeds 1,300,000 tons, having increased more than 30 per cent.
In the first and third of these periods every branch of manufacture
was prosperous, and the power of the people, at their close, to con-
tribute to the support of Government was thrice greater than it had
been at their commencement.
In the second and fourth every branch of manufacture was pros-
trate, and the power at their close to contribute to the support of
Government had been almost entirely annihilated.
In the fifth there has been an activity of commerce that before
had not been paralleled, as a consequence of which our people have
been enabled to contribute to the support of Government hundreds
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of millions, and with far more ease than in 1860 they could have
furnished tens of millions. Our whole experience proves, then, that
power for maintaining the Government grows or declines almost
geometrically as the consumption of iron increases or decreases
arithmetically.
Having reflected on the facts thus presented, I would now, my
dear sir, beg you to answer to yourself if our iron consumers, in
the course they have recently adopted, have not furnished proof
conclusive that they are of the same race precisely with the Bour-
bons, of whom it was said on their return to France on the down-
fall of Napoleon, that they had not profited by their long experience
of the troubles of exile to learn anything they had not previously
known, or to forget any of the prejudices with which they had
started. Both alike had been '' brayed in the mortar^' of experience,
yet had they remained as " foolish^^ as at first.
Such having been the course pursued in regard to this great
fundamental branch of manufacture, let us now look to that pre-
sented in reference to another and very subordinate branch that has
just now been brought into discussion — that of spool cotton. By
the tariff of 1861, the duty thereon was fixed at 24 per cent. By
that of 1862 it was raised to 30 per cent. That of 1863 made it
40. Again raised in 1864, we find it to be a combination of spe-
cific and ad-valorem duties that compels the foreign producer to pay
more than four times as much in gold as is paid by the domestic
one in paper. The domestic iron producer, on the contrary, pays
nearly as much in paper as the foreign one pays in gold. The
domestic paper producer pays more than half as much in paper as
the foreign manufacturer pays in gold, the great fundamental indus-
tries being thus almost entirely abandoned to the ''tender mercies"
of " wealthy English capitalists,'^ while the minor ones are placed
in a condition to feel themselves entirely secure.
The " absurdity" of all this is most remarkable, the market for
thread, cloth, books, and all other commodities being almost wholly
dependent upon the prosperity of the great coal, iron, and paper
producing interests. Such legislation would find its fittest legislator
in the man who should spend his mornings in carefully trimming
the branches of his trees while his evenings were as assiduously
employed in cutting away their roots.
To what cause is such "absurdity" to be attributed ? In great
part to the existence of that powerful British combination so well
described in the Report to Parliament heretofore given, and in no
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inconsiderable part to a necessity that was, at the date of the Con-
gressional action above described, supposed to exist for ''punishing
Pennsylvania." Almost inconceivable as it may seem that such
should be the grounds on which was based the decision of one of
the greatest of national questions, that it was so based there is not,
as I believe, the smallest reason to doubt. Assuming it so to have
been, it may not be, my dear sir, improper here to ask your atten-
tion to a few facts in relation to the past and present of the great
State which then was held to stand so much in need of punishment.
As New England furnishes us the type of that portion of our
population which has occupied New York, the northern edge of
Pennsylvania, northern Ohio, Indiana, and Illinois, Michigan, and
other Northwestern States, so do Pennsylvania and New Jersey
give us the type of the population of a great belt of territory, 120
miles in breadth, and ten times that in length, now containing more
than 10,000,000 of as industrious and active people as can be found
elsewhere throughout the world. When, therefore, Pennsylvania
speaks, she does so as the representative of the opinion of all those
millions, and therefore is it — and not because of her own particular
strength — that it has grown into a proverb, that as Pennsylvania
goes, so goes the Union.
How has she gone in those two great crises which, since the peace
of 1783, most have ''tried men's souls" — those of the institution in
1188 of the present government, and at later ones of the past four
years ? Let us see.
The Constitution, as adopted by the Convention of 1188, placed
the smaller States, as regarded Senatorial representation, on an
equal footing with the larger ones, and hence gave great offence to
nearly all of these latter. The single exception to this was found
in Pennsylvania, which, first of all to consider that great instrument,
was first of all, with the single exception of the little State of Dela-
ware, to ratify it. Months elapsed before her example was followed
by Massachusetts and Virginia, while something closely resembling
compulsion was required before it was accepted by New York.
In that great crisis Pennsylvania, by her remarkable magnanimity,
earned the title of the Keystone State, but whether or not it was
then that it was given to her, I have no means of knowing. Cer-
tain it is, that but for her prompt and decided action the Union, as
it since has been, would never have been accomplished.
Coming now to the second great crisis, that in which we are now
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involved, let us see how she has gone, and how far her action has
tended to maintain that Union which had been indebted to her for
all its previous existence.
I. Scarcely had the first call of the President been fully met before
she applied herself diligently to the creation of a large and fully
appointed army, whose acceptance was urged upon the Government.
Had it been accepted, the Bull Run battle would probably have had
a very different termination. Had it not existed, the war might,
and probably would, then have ended in the capture of Washington.
II. In three years and a half she has furnished to the army,
exclusive of militia and ninety days volunteers, above 300,000 men,
or more than a tithe of her whole population. Had all the loyal
States done as much, the whole number supplied by them would
have exceeded 2,000,000. Always among the first, even when not
actually first in point of time, she has never been behind any in
point of numbers.
III. Always ready in the field, she has been equally so at the
polls. When New York had abandoned the national cause, and
when the whole future of the country had become dependent upon
the question whether she would, or would not, place herself side by
side with that State and New Jersey and thus cripple the. Federal
Government, she gave in her adhesion to the great cause, and by a
majority that, allowing for the absent troops, was greater than it
had been at the first. Had she acted differently on that occasion,
the war must have come to an end, and the Union must have ceased
to exist. From first to last, therefore, she has proved herself to be
the Keystone State.
ly. In her Commercial Capital, she has given the most loyal
city of the Union ; the one that has, in proportion to its means,
furnished the largest contributions ; that one which alone has fed
the tired and hungry soldier, from whatsoever State he has hailed ;
and that one towards which the cold shoulder of the Government
has invariably been turned.
Such having been the course which has so recently subjected her
to "punishment,^^ we may now, my dear sir, without impropriety,
look for a moment to the machinery by means of which it has been
administered. As it was at the time explained to me, it was as
follows : Leader in the action was a British agent, representative
of those "wealthy English capitalists,^' who furnish "great instru-
ments of warfare against the competing capital of other countries,"
5
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by means of which they ''gain and keep possession of foreign
markets. ^^ Iron being abundant and cheap in England, a consider-
able quantity had been shipped to him, and he was naturally anxious
to economize the contribution to be paid thereon to the Federal
Government — that one for whose destruction his masters were then
so anxiously laboring. As it chanced, some little Western roads
stood in pressing need of iron, and money was then so scarce with
them that the saving of a few thousand dollars thereon was deemed
a matter of much importance. For accomplishing that saving it
was needed that they should obtain a change in the tariff law.
Forthwith, they and their English friends set themselves to prove
that the wear and tear of roads was twice as great as it really had
been, the producing power of American mills being at the same time
proved to be less than half of what we know to be its actual amount.
Other roads, the managers of which were thus deceived, were led to
lend their aid. To these were now to be added all of the men in
Congress who desired to see the Government reduced to bankruptcy,
and thus was formed a "ring'^ of size sufficient to ''punish Penn-
sylvania.'^ The deed was done, and thus was at once destroyed
all confidence in the permanence of a system that had been received
by the world as confirmation by Congress of that remarkable ex-
pression of the public will given at the Convention held in Chi-
cago five years since. For its destruction there was given, as I
believe, the vote of nearly every man who has on all occasions
opposed the Government in its efforts to maintain the national
credit, they well knowing, as I doubt not, that in crippling the iron
manufacture, and in punishing its chief representative, they were
rendering the largest service in their power to the rebellious States.
That this is a correct statement of the means by which that dis-
creditable action was brought about, I entertain no doubt. Admit-
ting for the moment that it is so, does it not present a state of
things of which we have reason to feel much ashamed ? In what
other nation, making any claim to civilization, are miserable foreign
emissaries permitted thus to prowl through the halls of legislation ?
Were such things tolerated in England or in France, should we
hold those nations in much respect ? Could they respect them-
selves ? Can we claim the existence of anything like self-respect
while such profligate and impertinent meddling with our affairs shall
continue to be tolerated? As it appears to me, we certainly cannot.
Having shown the past of the great State which has thus, and at
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the hands of a wretched foreign broker, received the "punishment"
she had so well earned, I desire now to ask you to look for a
moment at her present, with a view to the determination of the
question what should be her action in the future.
Four years since, she and Yirginia presented the types of two
great sections of the Union, the one north, and the other south,
of Mason and Dixon ^s line, the Ohio and the Missouri. On one
side was the freedom which always accompanies the connection of
agriculture with manufactures. On the other was the slavery which
always accompanies that exclusive devotion of labor to the work
of supplying distant markets which Britain and Carolina have
always sought to perpetuate. On both sides there existed a belief
in the necessity for measures of protection, except in the single, and
then dominant. State of Yirginia. Since then, however, she has
abdicated, and freedom has taken, or is now rapidly taking, the
place of slavery throughout the whole of that region of country, the
richest in the world in regard to metals of almost every kind. Her
abdication has placed the punished Pennsylvania now in the lead of
all the Mining States, embracing a territory of 600,000 square miles,
throughout which coal, iron, lead, copper, gold, and other metals so
much abound that labor alone is needed for carrying up, within the
next twenty years, their production to an extent far greater than
the present consumption of the entire world. To the development
of that wealth we have to look if we would sustain the Government
and maintain the Union. To it must we look if we would maintain
our credit and pay our debts. To it alone can we look if we would
sink so deeply the foundations of our great public edifice as to secure
for it that stability of action which is needed to give it permanence.
Upon this, however, through one of her little deputies, Britain
has put her veto, thereby punishing Pennsylvania for making the
attempt.
What now should the latter do ? Should she sit still while the
foundations of our system are being undermined? Should she
tolerate a policy thus forced upon the nation by foreign agents, that
must end in her own ruin, and that of her sister States ? Should
she longer tolerate the impertinent interference of British brokers in
affairs of such high importance ? That she should not, I feel well
assured. What then should she do ?
She ought to invite a Convention, representing the people of all
the Mining States, in population comprising probably three-fifths of
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the whole Union, and in national resources, three-fourths, with a view
to that combination of effort which is needed for enabting us to free
the country from this foreign dictation. She should proclaim her
intention to seek, by all constitutional means, to make of the De-
claration of Independence something of more valTie than would be
an equal quantity of mere blank paper. She should say to the
people of the whole of those States, that she desired to secure for
herself and them that protection which would enable them to unite
in supplying the world, both abroad and at home, with iron, confi-
dently relying upon a growth of demand that would keep pace with
growth of supply, and thus furnish evidence of increasing strength
and advancing civilization. To the people outside of the Mining
States she should say, that the more iron made at home the greater
would be the demand for cotton and sugar, and for cotton and
woollen goods ; that among the various portions of the country
there was a perfect harmony of interests ; that in her efforts at
stimulating into activity the great resources of the centre, she was
giving her energies towards securing happiness and prosperity to
the people of the north, south, east, and west ; and, that in thus
presenting a mode of outdoing England without fighting her, she
was doing that which was required for enabling all to enjoy in
peace the grand results which must be obtained from the suppression
of the great rebellion.
Twice already in great crises has she proved her claim to her
title of Keystone State. Let her do so once agdn ; let her now
do what it is clearly in her power to do, for giving practical effect
to the Declaration of Independence ; let her show to the world that
power, wealth, credit, prosperity, and happiness, may be procured
by means of peaceful measures that shall at the same time give us
satisfaction for all past injuries received from abroad; and she
will thereby earn the thanks of every American, every friend of peace,
every lover of his kind, every Christian throughout the world.
Having thus shown what is, as I think, the duty of what is now
the leading iron-producing State, I propose, in another letter, to
show what it is that I deem to be the duty of the iron producers,
and meanwhile remain, with great regard and respect.
Yours, very truly,
HENRY C. CAREY.
Hon. Schuyler Colfax.
Philadelphia, January 11, 1865.
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THE IRON QUESTION.
LETTER EIGHTH.
Dear Sir : —
For every ton of railroad bars now made here, the maker is re-
quired to contribute for the support of the war and for maintenance
of the public credit, at least ten dollars. For every ton of British
bars imported the manufacturer is required to contribute for the
same purposes, the sum of twelve dollars. For every ton of the
first transported, the producer is required to pay into the treasuries
of American railroad companies, and to the owners of American
vessels — both large contributors to the Public Revenue— a sum
that is, probably, on an average, little less than twice as great as
are the freights from abroad of that British iron which comes in
British ships, owned by the men who are now using their best efforts
in the advocacy, and in the material support, of the rebellion. * Their
vessels pay nothing in the shape of tonnage duties, nothing for the
use of lights that are maintained by us at heavy cost. Their
owners pay no excise duties on their iron. They have their coal free
of duty, and at a third of the cost of that used by our ships. They
are free from the thousand claims upon their means which now com-
pel our people to such high charges as have almost driven from the
ocean the Stars and Stripes. Those charges must continue if we
would maintain the Public Revenue, and they must become from
year to year more burthensome if we shall, by any error of legisla-
tion, diminish the power of any great branch of manufacture to
contribute to that revenue.
Taking into view, then, the direct and indirect contributions of a
ton of American bars, and placing them side by side with a ton of
those made in Britain, the producer of the former has not alone been
* I have now before me the transportation account of an establishment
within thirty miles of tide-water, and otherwise favorably situated, from
which it appears that the actual railroad charge for carriage of materials
and iron was, last year, $13 40 per ton.
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reduced to an equality with the latter, but to even a worse position,
the British producer being now, in effect, protected against the
American one, whereas, even under the British free trade tariff of
1846, the mere revenue duty gave the latter some slight protection
against the former.
In opposition to this it will, however, be said, that British rails
cannot now be imported without loss. That is true to-day, because
the premium on gold still remains as a slight protection. To whom,
however, are the iron producers indebted for it ? Is it to the iron
consumers ? Is it to that greatest of all consumers, the Government
— that one which has just decided that to that premium alone the
producer shall look in all the future for protection against those
" wealthy English capitalists,^' by whom they have so frequently been
crushed ? It is not ; so directly the reverse of this is it, that every
branch of that Government is now striving to put down the price
of gold, and thus to deprive that greatest of all our manufactures
of the little protection that has been left. But recently, as there
is the best reason for believing, a proposition has been made to it
on the part of these '' wealthy capitalists, '' having specially in view
a great reduction in the price of gold ; such a reduction as will, if
it shall be carried into effect, place the whole iron manufacture, and
many other departments of our now so greatly varied industry, en-
tirely at the mercy of the men who ''voluntarily incur immense
losses in order to destroy foreign competition, and to gain and keep
possession of foreign markets." Whether or not that particular
proposition, or any other looking in that direction, will be accepted,
no one can now venture to predict ; but it requires little of the spirit
of prophecy to venture on the prediction that if, in the present state
of our tariff legislation, any one at all like it shall be accepted, it
will bring with it such reduction of the Internal Revenue as must
result in bankruptcy of the Government, to be followed by Revolu-
tion.
From that Government the iron producer has now, practically,
no protection whatsoever. Does he, then, owe to it, in its character
of iron consumer, the performance of any act of duty ? As it seems
to me, he does not. Even in feudal times protection and service
went hand in hand together, the right to demand the latter ceasing
with the power to afford the former. Admitting, then, the facts to
be as I have stated them, are not the iron producers now free for
the adoption of whatsoever measures they may see to be required
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for self-protection ? That they are so, I fully believe. Still further
do I believe, that as men who desire to protect the public revenue,
maintain the public credit, and restore the country to a condition of
peace and union, and as citizens anxious to free it from the control
of foreign agitators who are in every manner seeking the accom-
plishment of disunion, it is their duty to combine together in oppo-
sition to the present combination for our subjection, and for the
re-establishment of a state of colonial dependence that, should the
present effort prove successful, will be more complete than it has
been at any period since the Peace of 1183.
So regarding the question that is now to be settled, it is my belief
that a sense of duty should prompt the iron producers to address its
consumers in the following terms : —
Gentlemen : —
Forty years since, notwithstanding our wonderful superabundance
of fuel and of ore, the iron manufacture had among us scarcely an
existence. The largest furnace in the Union could not produce 1500
tons a year, and the total product of pig metal was under 50,000.
In 1828, now but 36 years since, there was passed the first Tariff
Act based on the idea that the producers and consumers of food,
cloth, and iron constituted one great family, all of whose interests were
in perfect harmony, each with every other. To enable the food pro-
ducer readily to obtain iron, he must have the miner brought near
to him, thus to give value to the coal and the iron lying beneath
his land. To enable the producer of iron to obtain cloth, it was
deemed necessary that the spinner and the weaver should be brought
from abroad to eat the food while spinning and weaving the wool.
To enable the ship owner to obtain large return freights, it was
deemed necessary to secure to the immigrant certain and well-re-
warded employment. To enable the proprietor to sell his land, it
was deemed necessary to bring the market to his door, and thus
relieve him from the oppressive tax of transportation to which he
had been so long subjected by the British system. By that tariff
all those things' were provided for, the entire harmony of all real
and permanent interests being thus established. The result ex-
hibited itself in the facts, that before the lapse of a time equal to
that of a single presidential term the consumption of cotton and
woollen goods had nearly doubled, that of iron nearly trebled, while
that of coal had almost tenfold increased. As a consequence of
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this there was large consumption of tea, coffee, sugar, and other
foreign commodities, the public revenue was great, the national
treasury was full, and the public debt was in rapid progress to-
wards that entire extinction which occurred in the following presi-
dential term.
The great improvement in the condition of our people which thus
was proved, found its base in the great development of the mineral
resources of the country. Without power machinery could not be
driven, nor without machinery could cloth be made. As a means
of securing that development, the consumers of iron had pledged
themselves to protect its producers against a foreign combination
whose modes of operation are well described in a Keport to Parlia-
ment, made but a few years since, from which the following is an
extract : —
^'The laboring classes generally, in the manufacturing districts of
this country and especially in the iron and coal districts, are very
little aware of the extent to which they are often indebted for their
being employed at all to the immense losses which their employers
voluntarily incur in bad times, in order to destroy foreign competi-
tion, and to gain and keep possession of foreign markets. Au-
thentic instances are well known of employers having in such times
carried on their works at a loss amounting in the aggregate to
three or four hundred thousand pounds in the course of three or
four years. If the efforts of those who encourage the combinations
to restrict the amount of labor and to produce strikes were to be
successful for any length of time, the great accumulations of capital
could no longer be made which enable a few of the most wealthy
capitalists to overwhelm all foreign competition in times of great
depression, and thus to clear the way for the whole trade to step
in when prices revive, and to carry on a great business before /om^n
capital can again accumulate to such an extent as to be able to
evStablish a competition in prices with any chance of success. The
large capitals of this country are the great instruments of warfare
against the competing capital of foreign countries, and are the most
essential instruments now remaining by which our manufacturing
supremacy can be maintained ; the other elements — cheap labor,
abundance of raw material, means of communication, and skilled
labor — being rapidly in process of being equalized. '^
That pledge having been accepted, large amounts of capital had
been applied to the opening of mines, the building of furnaces and
mills, and the construction of the roads and canals required for
carrying their products to market, thereby laying the foundation of
a coal and iron trade that, had it been permitted to obtain develop-
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ment, would long since have placed the country in a position to
become the great exporter of iron and of machinery, and thus to
take the place that till then had been occupied by England. That
pledge however, unfortunately for the country, was not redeemed.
Then, as always before, agitation in and out of Congress was
resorted to for the purpose of striking down this great and funda-
mental industry, and thus relieving the ** wealthy English capi-
talists^' from all danger of future interference. As a consequence
of this railroad bars were made free of duty in 1832, and thus were
furnaces deprived of the great market opening in that direction for
their products. Next, and in the following year, the whole tariflT
was subjected to a process by means of which iron and all the
manufactures in which it was required were speedily to be deprived
of all protection. Confidence in the future now wholly passed
away. Mills and furnaces ceased to be built. Financial crises fol-
lowed closely one upon another, with the necessary result of almost
annihilating the value of the vast capital, counting by tens of mil-
lions, that had been applied to the development of the two great
industries upon which then depended the whole future of the Union.
It was a destruction of property till then without a parallel in
history, to have been accomplished by the act of the very people
who were destined most to suffer under it — the producers of food and
the consumers of iron. The one lost his market among the men
who mined the coal and ore and made the iron, and the other found
that the impoverished farmer was unable to buy cloth. In crushing
out these two great industries the iron consumers, your predecessors,
had, Samson like, torn down the pillars of the Temple, and had
involved themselves and their Governments, Municipal, State, and
Federal, in one common ruin. Railroads, constructed by aid of
cheap and worthless British iron made from a long accumulation
of cinder, fell so much in value that their proprietors were unable to
sell their shares at any price. Workshops were closed, and work-
men were everywhere reduced to ask for alms. Spinners and weavers
shared the same sad fate with the miner and the founder. T\^
trader, unable to collect the moneys due him, was unable to pay the
bank, and the banker followed him in stopping payment of his debts.
The National Treasury, reduced to bankruptcy, was unable to borrow,
on any terms, the amount required to make amends for the deficiency
thus produced in its then trivial revenue. Chaos had come again —
the same chaotic state of things that had preceded the passage of
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the Protective Act of 1824. It had come, too, as a consequence of
the inauguration of a government of foreign traders who sought
monopoly, and talked of freedom of trade. How free it was, has
been shown in the passage from the Parliamentary Report we have
above submitted to your consideration. How profitable it had been,
was proved by the fact, that, notwithstanding an increase of one-
fourth in population, the consumption of iron had scarcely at all
increased.
For all this a remedy needed to be found. It came in the form
of the tariff of 1842, by which the American people once again
pledged themselves to the capitalist, that if he would apply his
means to the development of those great mineral resources of the
country which constituted the foundation upon which, alone, could
rest securely our social edifice, he should be protected against those
** wealthy capitalists" who had so long been accustomed to regard
temporary losses as merely a mode of employing their great " in-
strument of warfare" in the manner most efficient for the accom-
plishing of the one great purpose, that of '' destroying foreign com-
petition and gaining and keeping possession of foreign markets."
The pledge thus tendered was accepted, and in a period brief almost
beyond belief mines were opened, roads were constructed, and fur-
naces and mills were built, capable of supplying a consumption
thrice as great as had been that of 1842. With that increase in
quantity came such improvements and economies in the mode of
manufacture as rendered it absolutely certain that, if faith should
be kept with the men who had thus given time, mind, and means
to the most important of all manufactures, but a brief period
would be required to elapse before they should be enabled to supply
the outside world with iron, and thus to furnish new evidence that
protection was the road that led most certainly in the direction of
perfect freedom of trade. At no period in our history had the de*
mand for labor been so great. At none had there been even an ap-
proach to the number of immigrants who then sought our shores.
At none had property commanded so large a price. At none had
public and private credit been so complete ; and yet, but five years
previously, labor had been everywhere in excess ; immigration had
tended to die away ; property had been wholly unsaleable ; bank-
ruptcy had been almost universal; and the public treasury had
found itself wholly unable to command the means required for com-
pliance with its engagements.
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As before, however, the public faith was violated, and because of
agitation caused by British agents. Almost without notice the pledge
given in 1842 was withdrawn in 1846, and the men who in full
reliance upon it had applied their millions and tens of millions to
carrying in effect the public will in reference to the great work of
internal development, were once more delivered over, bound hand
and foot, to the '' tender mercies of the wealthy capitalists" of Eng-
land ; the men who, while engaged in the work of *' overwhelming
all foreign competition," could afford to dispense with interest on
their capital, their competitors meanwhile paying 10, 15, or 20 per
cent, per annum for the use of the money required for carrying
stocks constantly accumulating on their hands while engaged in the
effort at maintaining the unequal contest.
Further even than all this, the Government undertook to furnish
to the foreign producer storage, and under such circumstances as
rendered an iron certificate of deposit equally transferable with a
money one ; whereas, the domestic producer was by law deprived
of all modes of transfer not accompanied by an actual delivery of
the property itself. The great iron consumer of the country had
thus, after having pledged itself to the men who had built the fur*
naces and rolling mills, opened the mines, and constructed the roads,
to protect them in their efforts for the establishment of compe-
tition, for the sale of iron, entered into an alliance, offensive and
defensive, with parties-whose essential object was that of destroying
all that competition, thereby increasing competition for the purchase
of British iron.
Such a course of policy could have but one result. One by one
iron masters succumbed to the pressure. One by one the miners of
coal found themselves obliged to abandon their works. Seeing ruin
ahead they begged of Congress to give them such a sliding scale as
should secure them $50 a ton for sound American iron, twice more
useful than the worthless trash that was then being forced upon the
markets at $40 by their British competitors. Trifling as was this
request it was refused, although but four years before Mr. Calhoun
had said, that if he could be assured that American iron masters
could supply the market at $80 they should have any amount of
protection they saw fit to ask.
American production had now fallen to little more than one-half
the amount at which it had stood on the day in which the British
iron masters' tariff, that of 1846, had gone into practical effect.
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Soon, however, came the influx of California gold, bringing with
it a large demand for iron, to be supplied, to a great extent, by
foreigners, at whose instance that tariff had been made, and now
arose a competition for the purchase of their products by which
they largely profited, charging double price for all they furnished.
In three years they sold in the American market a million of tons
of iron in its various forms, and at prices that must have paid
twenty times over for the losses ''voluntarily incurred'^ in the years
from 1848 to 1850. A hundred millions of dollars of American
property had been thrown idle, even where not destroyed, to enable
foreign iron masters to tax our people, in increased prices alone,
a sum little short of that amount. In the decade ending June,
1857, there were imported into the country hundreds of millions of
dollars' worth that would have been made at home but for the gross
violation, at its outset, of pledges voluntarily given by the ruined
and broken-down iron consumers of 1842. In that decade there had
been forced upon the English market millions upon millions of dol-
lars' worth of food that ought to have been consumed at home, each
successive increase of export tending to lessen the prices of the great
regulating market of the world, and thus reducing, to the extent of
thousands of millions of dollars, the amount yielded to our farmers
by their crops.* In this manner was built up the great foreign
debt that paved the way for that terrific crisis of 1857, which re-
sulted in the stoppage of merchants, the ruin of manufacturers, the
closing of mills, furnaces, and mines, and the depletion of the Na-
tional Treasury, and thus furnished new and more convincing proof
that in the coal and iron of the country were to be found the pil-
lars OF OUR National Temple, and that when they are being
torn away the destruction of the entire edifice is close at hand.
To those two great interests the whole period from 1856 to 1860 —
that which succeeded the first excitement consequent upon the dis-
* Every additional bushel of wheat thrown on the British market tends
to lower the prices there. Every reduction there is followed by a similar
reduction here, as Liverpool prices regulate those of New York, which
regulates Chicago. The reduction, therefore, is felt on the whole crop. It
would be a very small allowance for the reduction of British prices conse-
quent upon American supplies to put it at a shilling — 24 cents — per bushel.
This upon 1250 millions of bushels would give a loss to American farmers
of $300,000,000 a year. This is a large sum, and yet it is short of the
truth.
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CO very of California gold— -had been one of constantly recurring
crises, ending in the ruin of a large proportion of the people who
had given time, mind, and means to their development. To the
country at large it had given prostration so complete that, notwith-
standing an increase of population to the extent of full two-fifths,
the power of our people at its close to make demand for iron was
scarcely greater than it had been when the British iron master's
tariff of 1846 first became instinct with life and prepared to exert
its power for mischief. What was its extent shall now be shown.
Fifteen years before, the power of the Alliance between British free
trade and slavery which was now seeking the perpetuation of the
Colonial System, had exhibited itself in an attempt at Nullification.
Ten years later it had presented itself in the form of an almost
entire annihilation of our domestic commerce, and in bankruptcy so
general that it included individuals and banks. State and Federal
Governments. This time it exhibited itself in a deliberate attempt
at destruction of the Union. Throughout the whole of the period
that had then elapsed since Carolina had abandoned protection and
readopted that system which looked to the confinement of our people
to the raising of raw products for distant markets— the system of
slavery and barbarism— Liverpool had been becoming daily more
and more the centre round which revolved our whole societary
system. The men of the West exchanged with those of the East,
and those of the South with those of the North, through British
traders through those very men now who since have been devot-
ing all their means and all their influence to the final achievement
of the one great end they sc^ong had had in view, the dissolution
of the Union. The more they could destroy the domestic commerce
the smaller must become the threads by means of which its several
sections still continued to -be held together. By shutting up the
mines, furnaces, and mills of the North they compelled the South
to look to them for iron, and the greater. the dependence thus
produced the higher was necessarily the cost of machinery, and
the rate of interest, at the North, with constant increase in South-
ern dependence on Britain for a market for its cotton. British free
trade was thus but the necessary preparation for that movement of
1860 which gave us a war In the cowYse of which' rebellion has had
all the aid, material and moral, that British traders could give to it.
Fomenters of discord during the whole period to which we have
referred, they have now labored for its perpetuation.
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That war had, however, brought with it a remedy for our evils,
for it had, by reason of the secession of Southern Senators, given
to the people of the loyal States a power for self-protection of
which they had been long denied. The necessity for a re-invigora-
tion of the domestic commerce had now become so very evident
that once more there was given to the men of capital a pledge that
if they would apply their resources to the development of the great
mineral resources of the country they should now be certainly pro-
tected against the foreigners by whom American competition for the
sale of iron has been so often and so almost thoroughly destroyed.
Past experience was adverse to the acceptance of such a pledge, faith
having been so often broken that confidence in the national honor
had well nigh disappeared. Nevertheless, it was accepted, and
forthwith commenced a forward movement the rapidity of which
can find no parallel in the whole history of national development
here or elsewhere. But three years have now elapsed since the
country first began to recover from the first great shock of civil
war, and yet brief as has been the period we are already enabled to
show —
I. That the production of pig metal has now attained an amount
exceeding 1,300,000 tons; and with so great a development of
resources in regard to both fuel and ores that we are warranted in
saying, that large as is that quantity, it can be thrice increased in
the next four years :
II. That there now exists machinery for the conversion of iron
into bars, and into steel, fully capable of supplying the whole
present demand, accompanied with a JfcDwer of increase to an extent
equal to any future demand that you, consumers of iron, can, by
any possibility, make ;
III. That the value of the product .of the mines, furnaces, and
mills engaged in furnishing coal and iron now exceeds two hundred
and fifty millions of dollars, nearly all of which is given to the
payment of labor employed in the extraction of coal and ore, in
the conversion of the two into the iron that you so greatly need, or
in the extension of preparations for the supply of both :
lY. That by thus making demand for labor they are offering
large bounties for the importation of men who come here to eat
American food while mining coal or ore, building houses or ships,
constructing machinery of transportation and manufacture by
means of which value is given to land, or farms on which they
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and their children may raise the food required by other immigrants
who follow in their footsteps :
Y. That the market for food that, directly or indirectly, is thus
annually made for the produce of the farm, by these two great
branches of industry, is therefore greater in amount than was the
total export thereof to Europe in the whole fourteen years from
the commencement of vitality in the British Iron Masters' Tariff of
1846 to the breaking out of the rebellion of which that tariff has
proved to be the cause;
YI. That, at the lowest estimate, the contributions to the in-
ternal revenue, State and national, consequent upon the creation of
this immense market for food and labor, and the increased value
given to labor, land, and their products, must be taken at eighty
millions of dollars ; and —
YII. That, notwithstanding the heavy burthens that have been
laid on this great industry, notwithstanding the extraordinary in-
crease in the price of labor of all descriptions, and notwithstanding
the reduction of the American producer to a level, so far as protec-
tion goes, with his British competitor, the latter is even now so far
undersold in our own market that American furnaces and rolling-
mills supply the whole American demand.
That our duty has been performed, and that all the pledges which
may have been given for us have been redeemed, are facts of which
we thus furnish evidence that cannot be questioned. Has that of
the nation been performed ? Has it kept faith with us ? Has it
redeemed the pledge of protection given at the time when, in the
day of its distress, it invited us to devote our lives, and give our
time, our mind, and our means towards the re-establishment of
that competition with British iron masters for the sale of iron
which, under the blighting influence of the British free trade tariffs
of 1846 and 1857, had so nearly disappeared? Let us inquire.
In March, 1861, before the imposition of any internal tax what-
soever, the protection to be given to railroad bars was fixed at $12
per ton, and it was then well understood to be the very least that
could with propriety be accepted by the parties who were thus to
be invited to engage in that important and expensive work.
A year later, heavy taxes having been imposed on many articles
used in manufactures generally, there was granted to all of them,
with the single exception of railroad bars, an additional five per
cent. On that one excepted commodity, which now makes demand
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for nearly 500,000 tons of pig metal, the increase was limited to
the exact amount of the direct tax, $1 50 per ton, no allowance
having been made, as in other cases, for the taxes on coal, lime,
or other materials, nor for many others, including that on incomes.
We have here the first violation of the pledge given in 1861.
At the last session of Congress, pig-iron was taxed $2 per ton,
equivalent to nearly $3 on a ton of bars. The taxes on coal and
other materials were largely increased. That on railroad iron itself
was more than doubled. Others were imposed too numerous here
to recapitulate — the general result being, that our various contribu-
tions, consequent upon the existence of the war, have now been
carried up to $10 per ton. Was the duty on foreign iron corre-
spondingly increased ? Was the pledge given in 1861 now re-
deemed ? On the contrary, such was the agitation on the part of
many of you, gentlemen, consumers of iron, urged thereto by
British emissaries, that the duty on foreign iron was reduced to
exactly the point at which it had stood when domestic iron had
been free from all such charges. Thus for the second time was
the national faith violated, and this time on so grand a scale that
we find ourselves now placed in a position, as compared with the
foreigner, worse than was that we occupied under the ultra free
trade tariff of 1857. Then, we had some slight protection. Now,
the foreigner, as we shall show, \^ pi^otected against us.
Before doing this we must, however, consider the present transient
protection resulting from the fact that the cost of British iron,
and the duties on it, must be paid in gold, the premium thereon
being all that now remains to us as offset against a duplication,
even where not a triplication, of the cost of labor and its products.
No part of that, however, do we hold because of any exercise of
power by Government, from which we yet hold the pledge given in
1861, now waiting to be redeemed. So far the reverse of this is it,
that time and again has its Finance Minister given his best efforts
for the removal of the only protection thus left to us. Time and
again has it listened to proposals for its removal coming from
foreigners who see therein the only remaining bar to the flooding
of our markets with the produce of foreign mines, mills, and
furnaces. Time and again have there been, on the part of Congress,
efforts at movement in that direction. Time and again have we
been assured by leading Republican journals that with any increase
in the prospect of peace there must be a growing tendency towards
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the breaking down of that only barrier which stands between the
great fundamental industries of the country and utter ruin. The
great iron consumer spares no effort for the accomplishment of that
object, and therein all the lesser consumers unite with it heart and
hand. Busily as the paper consumers are employed in striking
from under their feet that great branch of manufacture which
furnishes the foundation on which they stand, even more so are you,
gentlemen, iron consumers, engaged in undermining the foundations
on which now stand the paper-maker and the printer, the spinner
and the weaver, the ship-owner and the railroad proprietor, the
machinist and the architect, the city and the county revenues, the
State and Federal Governments. All of these, large consumers of
iron, are now anxiously awaiting the time when, to the already
violated faith of the Union there shall be added that conversion
into gold of the taxes that have been so heaped up on us — graduated
as they had been by a paper standard — which shall, when connected
with public storage, place the foreign producer in the enviable posi-
tion of being protected by the American Government against
THE American iron master. All of them seem to be of the belief
that by thus annihilating American competition for the sale of iron
and increavsing American competition for the purchase of British
iron their demands must be more cheaply supplied. All of them
have forgotten the lesson taught by the repeated crises of the British
free trade tariffs of 1816, 1833, 1846, and 185Y. All of them,
finally, seem to be of the opinion that when the foundation upon
which now rests our whole social system shall have been removed,
the edifice will yet remain unharmed. It is a sad delusion, but as
it exists we find ourselves required to look it fully in the face and
determine what it is that our duty to our country and to our-
selves requires us to do in the state of things that has been pro-
duced.
With the restoration of peace there will arise a demand for labor
throughout the South that must tend greatly to prevent any mate-
rial decrease in its price throughout the North. Tobacco and
cotton -fields will thus become competitors with the furnaces, mills,
factories, and other establishments now in existence, and these latter
must for a considerable period of time be compelled to choose be-
tween paying high wages, on the one hand, and closing their works
on the other. The present rate of wages in the coal and iron trades
is little less than treble that of England, and how little the latter
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can be expected to rise is shown by the facts, that the Scottish
miners, at the close of a turn out, on which they expended all their
means to the extent of $1,500,000, have recently been obliged to
give in and return to work under the wages against which they had
rebelled ; and, that the very latest Iron Trade Circular (Birming-
ham) advises its readers, that " the present state of the iron trade
in all parts of the country, both in North and South Staffordshire,
South Wales, and the Cleveland districts, justifies, or rather we
should say, forces their masters to call upon the men for a reduction
of wages.'' Such being the case, it is clear that it is not in that
direction we can look for any change by which we might hope to
profit. Further even than this, British wages must rise so soon as
the ** wealthy English capitalists" shall have had the way opened
to them for crushing out American competition, and then immigra-
tion must, as we feel assured, fall to a point lower than any it has
touched' since the terrific crisis of 1842. In that direction, then, we
cannot look for help.
Taxes must be maintained at the present standard should that
continue practicable. Further, indeed, than this, they must, wherever
possible, be increased, as tfie nominal amount of business declines
with the decline of prices. Incomes will count far less in gold than
they now do in paper. Sales will do the same, 'and the gold received,
admitting the quantity of goods sold even to remain the same, will
be one-half less than that now received in paper. The interest on
the debt will remain undiminished. So, too, must it be with soldiers'
and sailors' wages, and the salaries of oflQcers, civil, military, and
naval — all of whom will then be enabled to purchase twice the
quantity of commodities they can now command. Looking at all
these facts, it seems to us to be quite clear that to meet the demands
of the Government it will be needed that, wherever possible, the
taxes shall be raised. That they cannot be reduced is absolutely
certain.
Labor, for a time at least, remaining unchanged, and taxes con-
tinuing to be collected on coal, oil, &c. &c., the cost of all the
materials of iron must continue to be so high as to afford -to the
iron master only the choice between closing his works, on the one
hand, and ruin on the other. Transportation, the charge for which
has now been carried up to a point so terrific, will remain for a time
unchanged. Railroad companies, having tasted the sweets of such
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high charges, will certainly try the experiment of breaking their
customers before they abandon them.
Interest must rise as bank loans decline in their amount. In all
past crises it has been from three to six times higher than has been
paid by " wealthy English capitalists'' when they have been com-
pelled to carry heavy stocks of iron.
Taking all these things together we think it quite safe to say
that, for the first year at least, the cost to the American iron master
of producing and transporting a ton of bars will be greater by
twenty dollars than will be that of a ton produced in England
at the present low rate of wages. Against this there will be a
difference of two dollars in the taxes. The protection of the
'' wealthy English capitalist" will be complete, but where then will
stand those American rivals who have now so completely occupied
the domestic market as to have greatly reduced English wages,
and thus paved the way for immigration from the British soil
of tens of thousands of her workers in coal and iron, whose services
have so much been needed ? Once here, they and their children
would forever be customers to the farmers of the Mississippi Yalley.
Forced to remain where they are they will, as heretofore, eat the
food of Russia or of Egypt. That they will not come under a
system that protects the British capitalist against his American
competitor is very certain. The importation of such machinery,
capable of making engines, while reproducing themselves, o/* i^/^e
past year, is worth more to the country than all the iron that has
ever come to it from British furnaces since the unfortunate repeal,
under Carolinian threats of secession, of the protective tariff of
1828.
Such being the existing state of facts, and such the prospects, we
have now to determine what we ourselves should do. To attempt,
under such circumstances, to maintain a competition for the sale of
iron, could result only in a gradual depletion of every ironmaster in
the country, and in the abandonment of his works after he should
himself have been ruined. The day of high prices would then come
round again, but there would exist no person to profit of it. By
withdrawing at once, before the day of exhaustion had commenced,
we should, on the contrary, retain ourselves in a position to resume
work when the day should have arrived for giving a new pledge of
the faith that has been so often, and, as we think, so discreditably
violated. By adopting this latter course, we should retain the
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power to aid in the re-establishment of that internal commerce upon
which the country is now so entirely dependent for the power to
maintain the Government. By pursuing the former, we should
speedily place ourselves in a condition to require aid, instead of
granting it. After full consideration, therefore, we have arrived at
the conclusion that we should best perform our duty, both public
and private, by withdrawing from competition with those '^ wealthy
English capitalists" who are now so anxious to sell cheap iron, and
who have always doubled their prices so soon as they had annihi-
lated their American competitors. You will, therefore, please to
receive this as a notice that from and after the first of March next
our works will be closed, and you will be free to make such arrange-
ments in regard to the supply of iron as best may suit your conve-
nience.
Should, in the mean time, any of you be disposed to commence
the work of producing iron that is to pay nearly as much in taxes
as the foreign product pays in the form of duties, you can, as we
think, be supplied with any number of furnaces and mills at their
actual cost, and in very many cases at less than cost.
Yours, respectfully, A. B.
C. D.
E. R
Such, as it appears to me, is the course that duty requires of the
ironmasters of the country to pursue. Past experience proves that
there can be no reliance on the pledges given to them when the
country needs their aid. Foreign emissaries haunt the halls of
Congress, and their presence there is not alone tolerated, but actu-
ally courted, by gentlemen who can see advantage in enabling a
constituent to save a dollar or two upon a few thousand tons of
iron, and who cannot see that the power to buy iron at any price
has resulted from American, competition for the purchase of the
products of the farm, and for the sale of those yielded by the mine,
the furnace, and the rolling-mill. It is time, therefore, that they
should now abandon the position they so long have occupied, that
of supplicants for mercy, and, as the best mode of serving the
country, maintaining its revenue, and thus enabhng its Government
to live, take at once the true ground that, in ceasing to grant pro-
tection, the iron consumers have lost all claim upon them for the
performance of duties.
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It may perhaps be charged that this would be combination. It
would be so, and the time has come for it. The country has now
to carry on a war with foreign capitalists and their agents, for the
maintenance of its credit, for the perpetuation of the Union, and for
the conversion of the Declaration of Independence into something
more than a mere form of words, and it will be worsted if the honest
people of the country do not combine for its support. By so doing,
they will speedily be enabled to obtain from foreign nations indem-
nity for the past and security for the future, for in that combina-
tion they will be sure to find the way to outdo England without fight-
ing her.
To enable ourselves to succeed we need only that stability of
action which shall give to the capitalists security against foreign
agitation. But a few days since one of the largest importers of
British iron expressed to one of my friends a wish that Congress
should take such decided action as would warrant him in turning
his capital from the importation to the production of this most
important commodity, the materials of which so much abound
throughout the Union. Let it but do this and the day will then
be close at hand when the annual production will count by mil-
lions of tons, and when our farmers will be relieved of all necessity
for crushing down, in the regulating market of the world, the
prices of all their products. The annual saving thereby produced
would be greater in its amount than the value of all the iron im-
ported into the country since the Peace of Ghent.
In my next I shall ask your attention to the Farmer's Question ;
meanwhile, my dear sir, remaining.
Yours, very truly,
HENRY C. CAREY.
Hon. Schuyler Colfax.
Philadelphia, January 16, 1865.
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THE FARMEE'S QUESTION.
LETTEE NINTH.
Dear Sir : —
In a former letter the money value of the products of our coal
and iron mines, our furnaces and rolling-mills, was stated as being
little less than two hundred and fifty millions. Following that iron
through the foundries and machine shops we shall find that those
industries are this day yielding to the nation commodities whose
market value certainly exceeds four hunckred millions ; and then
following their proceeds we find that nearly the whole is distributed
among the men who own the land and those who cultivate it.
Hence it is, that whenever those two great industries prosper the
farmer prospers ; and that when they suffer he too becomes a heavy
sufferer.
Are the facts so ? it may here be asked. Are their proceeds so
applied ? Let us see.
Of this vast sum a very large proportion is distributed among
the men who mine our coal and ore — men who aid in transporting
them — men who aid in converting the two into iron — men who
puddle the iron and roll the bar — and other men who convert the
bar into hoes, spades, axes, knives, and engines. What becomes
of it then ? They buy food for their families and themselves, all
of which comes from American farmers. They purchase clothing
made of Western wool or Southern cotton, and converted by means
of men and women who tend the spindle and the loom while eating
the food of Iowa and Minnesota. They buy houses composed of
bricks and lumber, the one made, and the other cut and brought to
market, by men who eat the pork of Ohio and the corn of Indiana
or of Illinois. They buy newspapers whose types and paper repre-
sent the hams of Kentucky, the wheat of Pennsylvania, and the
butter and cheese of New York, while its press represents the food
consumed in workshops which, in the wonderful character of the
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machines turned out, furnish to the world puch conclusive proof that
were American farmers but true to themselves American inge-
nuity would speedily relieve them from the necessity for employing
themselves in raising food for distant markets, the proper work of
the barbarian and the slave, and of them alone.
A part of this vast sum goes, however, to the owners of land
that yields coal, ore, or lime ; another, to those who own furnaces,
in which the three are converted into iron, or shops in which
iron is converted into machinery to be used by the farmer, the
weaver, the locomotive builder, and the builder of ships ; and we
may now inquire what becomes of them. These men have families,
and those families likewise need food that comes from American
farms ; clothing all of which, were our farmers true to themselves,
would represent the products of American agriculture; houses
which represent the labors of brickmakers and bricklayers, lumber-
men, carpenters, masons, workers in coal, and workers in iron, all
of them men who help to make the great market in which ex-
changes of food to the annual extent of thousands of millions of
dollars are now made. The profits of some of the owners of the
great works from which are now annually turned out so many
millions of tons of coal, so many hundreds of thousands of tons of
iron, and so many engines, are, however, as we know, greatly in
excess of their expenditure. What becomes of the surplus ? A
part of it is applied to the extension of their works, and thus is
created demand for labor, enabling many to obtain food and cloth-
ing who otherwise might be unemployed and therefore unable to
purchase either. Another part goes to the making of railroads,
thus creating a further demand for labor, and giving the farmer a
purchaser for his pork and his corn while at the same time increas-
ing his facilities for reaching the distant markets. Another part,
perhaps, is lent to the Government, and thus aids it in paying the
farmer for the food, the clothing, and the machinery required by
our armies in the field. Thus, of the whole five hundred millions,
large as is the sum, it may, as I believe, be safely assumed that more
than ninety per cent., and perhaps even ninety-five, goes directly,
or indirectly, to the payment of labor that is employed in clearing
and cultivating the land.
Turning now back to the period of the British free trade tariffs
of 1846 and 1857, we see that hundreds of millions worth of
foreign iron had been imported— part of it in the form of knives
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and razors, very much of it in that of mere pig metal, and hun-
dreds of thousands of tons in that of rails to be laid on lands the
larger part of which abounded in fuel and in ore waiting alone the
application of labor to their extraction and conversion. Why was
this ? Because the system of that day had been framed in obedience
to orders issued by the men who since have been employed in build-
ing pirate ships to be used in driving from the ocean the stars and
stripes ; in fitting out other ships for running our blockade ; and
generally in giving to the rebellion that aid, material and moral, by
help of which a war that should have been finished in a year has
been prolonged throughout a whole Presidential term, and at a cost
of hundreds of lives and hundreds of millions of property that might
otherwise have been saved.
For the iron thus imported we have paid hundreds of millions
of dollars. What became of them'^ Did the people who mined
the coal and the ore employed in making that iron eat American
wheat ? Did they wear clothing composed of corn raised in Iowa
and wool sheared in Ohio ? Did they occupy houses built with
lumber representing the food of Michigan or Minnesota? Did
the workmen who built the houses they occupied consume potatoes
raised in Maine, or cabbages raised in Pennsylvania ? For an
answer to these questions I give you the following figures repre-
senting the wheat, the wool, the flour, the pork, and the lumber
exported — not alone to the country from which we had the iron,
but to France, Belgium, and Great Britain, the countries which have
deluged us with the silks, the woollens, the cottons, and the iron
by means of the purchase of which we have been involved in a
foreign debt of $500,000,000 that now makes upon vl^, for the mere
payment of interest, a demand to meet which requires not less than
$30,000,000, a sum more than half the product of California. The
years I have taken are the three which immediately preceded the
breaking out of the great rebellion. The country had then for more
than a decade enjoyed the blessings of that British free trade
which, as we were assured in 184t, was destined, before the lapse
of twenty years, to make a demand for American food whose annual
amount would count by hundreds of millions of dollars. To what
extent those predictions have been realized will be seen by the
following figures : —
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Total Export.
To Great Britain, France,
and Belgium.
1858.
Pork .
. $2,852,492
$360,000
Indian corn .
. 3,259,039
2,163,000
Lumber
. 1,240,000
215,000
Wheat .
. 9,061,000
6,436,000
Wheat flour .
. 19,328,884
5,006,000
Wool .
389,512
15,000
1859.
Pork
. 3,355,746
563,000
Indian corn .
. 1,323,103
281,000
Lumber
. 1,001,216
247,000
Wheat .
. 2,849,192
1,402,000
Wheat flour .
. 14,493,591
1,147,000
Wool .
355,563
129,000
1860.
Pork .
. 2,852,942
371,000
Indian corn .
. 3,259,039
1,894,000
Lumber
• . 1,240,425
475,000
Wheat .
. 9,061,504
6,389,000
Wheat flour .
. 19,328,880
5,133,000
Wool .
211,861
. $95,463,989
141,000
Total . .
$32,367,000
Annual averag
e . 31,821,330
10,789,000
The annual average, as here is shown, of the demand for these im-
portant commodities by the three great manufacturing countries
of Europe, was less than $11,000,000, or little more than 16 cents
per head of their total population. A single hundred thousand of
their people attracted here by large demand for labor and liberal
wages, would furnish a market for the various products of the land
much greater in its amount.
The great European market for food that had been promised to
our farmers had, as we see, totally failed. Had the deficiency of
demand thus produced been in any manner made up by immigration ?
On the contrary, the number of foreigners coming here to sell their
labor was less in those years, as has been shown in a former letter
— less, too, by thirty per cent.— i-than it had been in the year in
which the British iron master's tariff of 1846 first became endued
with power for mischief.
Under the free trade tariff of 1841-2 the markets furnished by
the coal and iron industries of the country could but little have ex-
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ceeded $50,000,000. Under the protective tariiBP act of 1842, that
market thrice increased in size, having, in less than half a dozen
years, grown to $150,000,000. In the same time immigration had
also thrice increased, and as every immigrant became a consumer on
the moment of his arrival, whereas one year at least must elapse
before any one of them could make the slightest addition to the
quantity of food produced, it followed that to the whole extent of
their consumption of food, of wool, of cotton, of lumber, and of all
other of the products of the land, they constituted an addition to
the farmer^ s market. Admitting that their average power to earn
wages amounted to but $150 a year, the addition amounted to
$25,000,000. The movement had, however, then only just com-
menced. The more iron made in 1846 the greater was the quantity
required in 184t ; and the more made in this latter year the greater
would have been the quantity required in 1848, '49, and '50 ; and
the greater the immigration of 184t the more would have been its
tendency to increase in each and every of the succeeding years, had
protection been maintained. Had it been so, our coal and iron in-
dustries would this day amount to more than $1,000,000,000, making
demand to nearly the whole of that vast amount for the fruits of
the earth, while immigration would by this time have been giving
us a million per annum of European workmen, consumers, from the
moment of their arrival, of the products of American farms, and
busily engaged in the work o-f further increasing by procreation the
number of mouths requiring further supplies of food and wool.
We were told, however, that iron masters were too rapidly grow-
ing rich ; that the taxes imposed for their benefit on iron con-
sumers were so great that they amounted to more than the whole
price at which their finished products could be bought ; that the
farmers were thus made mere ''hewers of wood and drawers of
water" for great monopolists ; that protection closed the markets
of Europe against their '' breadstuflfs ;" that we were essentially an
agricultural people, and so likely to remain ; that we therefore
needed free trade ; and that, for all these reasons, the protection
should be abandoned. It was abandoned, and we have now the
result in the facts, that we had given up a domestic market among
the producers of coal, iron, copper, lead, and cloth, which then
amounted to hundreds of millions, and would since then have
arrived at thousands of millions, and had, at the close of the system
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inaugurated in its stead, obtained in exchange a market which took
from us of pork, corn, wheat, flour, wool, and lumber, less than
$11,000,000 a year, or one-third of a dollar per head of our then
population. Such had been the results obtained in 1860 by means
of agitation on the part of those British agents by whom had
been represented in 1846, in the Halls of the Capitol, those wealthy
capitalists of England whose first desire was that food might be
obtained more cheaply while iron should command a higher price.
Did they obtain their end ? To obtain an answer to this question
we may here compare the prices in the New York market at the
commencement and the close of that period of the British free trade
system which dates from December, 1846. As given in a table
now before ipe, they are as follows : —
1847.
1858.
1859.
I860.
Wheat flour
. 7 68
4-25
5 50
5 50
Rye flour .
. 5 06
3 40
3 75
3 50
Corn meal .
. 4 62
3 50
3 90
3 80
Pork .
. 14 93
18 35
16 35
17 75
Mess Beef .
. 12 00
11 50
8 25
5 25
Butter
25
25
22J
18
In the period intervening between the first and last of these
dates, California and Australia had given to the world probably
$800,000,000 in gold, and yet, instead of increasing as it should
have done, the power of the farmer to. obtain money in exchange for
his products had largely diminished.
The reason for this was to be found in the fact, that determining
to go abroad to get his iron and his cloth he had destroyed his
great market. To what extent this had been done you may, my
dear sir, judge for yourself after referring to an extract from an
Address of one of the Charitable Societies of New York, given in
a former letter, but here reproduced because of its important bearing
on the question now before us : —
" Up to the present the Association has relieved 6,922 families, contain-
ing 26,896 persons, many of whom are families of unemployed mechanics and
widows with dependent children, who cannot subsist without aid. As the
season advances the destitution will increase. Last winter it was thrice
as great in January as in December, and did not reach its height until the
close of February."
This paper bears date more than a year previous to the great
crisis of 18^7. Subsequently thereto the state of things was very
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far worse than that above described. Our public warehouses were
filled with foreign merchandise, always ready to supply the material
of auction sales. Our auctioneers, constantly at work, supplied
wholesale and retail dealers, at prices fixed by themselves. Our
shops were gorged so thoroughly with foreign food and labor in
every form, from the coarsest woollens to the finest silks, as to leave
no place for the domestic food and labor that sought a market.
Such was the mode of " warfare,'' by means of which " the most
wealthy capitalists^'' of Britain had been enabled to ^^ overwhelm all
foreign competition in times of great depression, and thus to clear
the way for the whole trade to step in, when prices revived, and to
carry on a great business, before foreign capital could accumu-
late to such an extent as to be able to establish a competition in
prices with any chance of success.^^ Such, my dear sir, was the
sort of warfare, by means of which Ireland and India had been
ruined, without the necessity for firing a gun, or drawing a sword.
Such was the warfare against which your fellow-citizens, for ten
years previously, had sought, but vainly sought, to be protected —
the only answer to the petitions having been, that the duties of the
government were limited to the task of protecting itself, leaving the
people to protect themselves as best they could.
As a consequence of this it was ; that after a growth of pauper-
ism steadily continued during all those years, it suddenly so much
expanded that hundreds of thousands of our people were wholly
unable to sell their labor, or to purchase food and clothing :
The factories, mills, mines, and furnaces, the cost of which had
counted by hundreds of millions of dollars, were then closed, and
likely so to remain :
That the power to diversify the employments of society was then
declining from day to day :
That, simultaneously therewith, we were adding to our population
a million of persons annually :
That the necessity for resorting to the labors of the field, as
affording the only means of support, was steadily increasing :
That the supply of food tended, therefore, to augment, as the
domestic consumption declined : and
That its price tended, therefore, steadily to fall, and was, at the
outset of the war, likely to be lower than had ever yet been known.
The production of iron had largely decreased, as under such
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circumstances might readily be supposed. What, however, was its
import ? Did the figures there presented furnish any evidence of
increase of power on the part of the farmer to purchase hoes or
ploughs, or on that of the miner to purchase engines ? Let us see.
In the three years above referred to there was imported of iron
and manufactures of iron, to the extent of $45,000,000, giving an
annual average of $15,000,000, or less than fifty cents per head of
our population. In the hope to secure some trifling reduction in
its price our farmer had been persuaded to throw away a market
that then amounted to hundreds of millions, and that would, before
1860, have reached thousands of millions, and now the whole
amount taken from him of his chief products, by the three
principal manufacturing nations of Europe, was barely sufficient to
pay for the little iron that he could afford to purchase and the
freight upon it ; that freight, too, paid chiefly for the use of British
ships. As a necessary consequence, the country was running in
debt from day to day more deeply, and the interest on that debt
was even then absorbing more than half the gold yielded by
California. Hence it had been that the prices of the farmer's
products had fallen in price as the supplies of the precious metals
had so rapidly increased. Busily engaged in selling skins at six-
pence each, and taking pay therefor in tails at a shilling, he had
been giving all his efforts at increasing the power of that great
combination of ^'wealthy English capitalists," the primary object
of all whose operations had been that of depressing the prices of
food and raising the price of iron — diminishing still further that
of the skins and raising still higher that of the tails.
The most useful to the British traders of all the British colonies
is that one which embraces these United States. Content with the
word '' in dependence, '^ Americans take no care to make themselves
or their country independent. So far the reverse is it, indeed, that,
while talking largely of the Monroe Doctrine, they permit their
laws to be dictated to them by British agents, representing ''.wealthy
capitalists," who now seek to perpetuate throughout this Western
Continent the system so well described in the following passage
by one of their predecessors of the last century : —
''Manufactures in our American colonies should be discouraged,
prohibited." "^ "^ "We ought always to keep a watchful eye
over our colonies, to restrain them from setting up any of the manu-
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factures which are carried on in Great Britain; and any such
attempts should be crushed in the beginning.^^ * * ''Our colo-
nies are much in the same state as Ireland was in, when they began
the woollen manufactory, and as their numbers increase, will fall
upon manufactures for clothing themselves, if due care be not taken
to find employment for them, in raising such productions as may
enable them to furnish themselves with all the necessaries from us.''
* * ''As they will have the providing rough materials to them-
selves, so shall we have the manufacturing of them. If encourage-
ment be given for raising hemp, flax, &c., doubtless they will soon
begin to manufacture, if not prevented. Therefore, to stop the pro-
gress of any such manufacture, it is proposed that no weaver have
liberty to set up any looms, without first registering at an office,
kept for that purpose.'' * * "That all slitting-mills, and
engines for drawing wire or weaving stockings, be put down.^^ * *
** That all negroes be prohibited from weaving either linen or
woollen, or spinning or combing wool, or working at any manufac-
ture of iron, further than making it into pig or bar iron. That
they also be prohibited from manufacturing hats, stockings, or
leather of any kind. This limitation will not abridge the planters
of any liberty they now enjoy — on the contrary, it will then turn
their industry to promoting and raising those rough materials."
* * " If we examine into the circumstances of the inhabitants
of our plantations, and our own, it will appear that not one-fourth
of their product redounds to their own profit, for, out of all that
comes here, they only carry back clothing and other accommoda-
tions for their families, all of which is of the merchandise and
manufacture of this kingdom." * * "All these advantages we
receive by the plantations, besides the mortgages on the planters^
estates and the high interest they pay us, which is very consider-
able,^^— (Gee on Trade, London, 1 750.)
A century earlier the Germans had ridiculed the people of Eng-
land as men who sold skins for sixpence and bought back the tails
at a shilling. Protection had changed all this. It had brought the
English artisan to take his place by the side of the English farmer,
and now the English trader desired to do by the American colonist
what the German had previously done by him — giving his whole
efforts to the work of compelling the sale to him of skins at- six-
pence and the purchase /rom him of tails at a shilling. Thus far
they had, with us, most thoroughly succeeded, and had done so
by help of the very farmers by means of whose plunder they had
obtained the power which recently has been so much increased, and
of the exercise of which we have now so much reason to complain.
To that great error on the part of American farmers we have
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been indebted for the present war. What are the facts bearing on
their present condition and future prospects, that have been de-
veloped in its course, and what the measures required for enabling
us to outdo England without fighting her, and thus achieve an inde-
pendence that shall be something more than a mere form of words,
I propose to show in another letter, meanwhile remaining.
Yours, very truly,
HENRY C. CAREY.
Hon. S. Colfax.
Philadelphia, January 20, 1865.
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THE FARMEH'S QUESTION.
LETTER TENTH.
Dear Sir : —
The peri6d, 1858-60, embraced in the returns given in my last,
was one of peace, and much of the food of the West yet continued
to pass southward on its way to European markets. Wheat took
the form of flour, and corn became pork, for the supply of men en-
gaged in raising and forwarding cotton. The latter went abroad,
there to be combined with Polish and Russian wheat, to be thence
returned to the poor farmer of Wisconsin who was glad to obtain
even a single yard of indifferent cojton cloth in pay for a bushel of
corn that had been exchanged in the market of Manchester for fif-
teen or twenty yards. He was thus giving whole skins for sixpence
and taking his pay in tails at a shilling ; as a consequence of which
he was always in debt, and always glad to borrow a little money,
even when obliged to pay for the use of it at the extraordinary rates
of 20, 30, 40, 50, and even, as I have understood, 60 per cent, per
annum. Why was this ? Not certainly because of any absence
of fertility in the soil, that of the Mississippi Yalley being equal in
all natural powers to any other in the world. Not because, as in
Europe, of any necessity for paying rent to a greedy landlord, for
he had already attained to the position so much coveted by the
working class of Europe, that of landed proprietor. Why then was
it ? Because he had, of his own motion, made himself the mere
serf oi the class whose operations were so well described in the pas-
sage given at the close of my last ; of that class which desires that
food may be cheap and cloth and iron dear ; of that one which
seeks to compel all the farmers of the world to bring their products to
a single diminutive market, there to sell what they have and to buy
what they need ; of that one which talks of free trade while seeking
to create for itself an absolute monopoly of machinery of conversion
and exchange^ of that one, in fine, which now stands indebted to him
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and others like him for all the power which has, in the past four
years, been used for the destruction of our commerce on the seas,
for the maintenance of the rebellion, and for the annihilation of that
Union upon whose prolonged existence is now dependent the whole
future of the laboring classes not of America alone, but of the world
at large.
The war having closed the South against the products of the
West, there arose a necessity for seeking a market somewhere in
the East. Where, however, could they have even looked for it, had
we continued to maintain that British free trade system under which
we had been made so almost entirely dependent upon distant nations
for supplies of cloth and iron ? Look as they might it could
nowhere have been found. Happily, secession brought with it, and
on the instant, a power on the part of the North which speedily ex-
hibited itself in the re-adoption of that protective system by means
of which the value of the products of our coal and iron mines, our
furnaces and rolling mills, has been carried up to two hundred and
fifty millions of dollars, making demand, in a thousand ways, for the
fruits of the earth to little short of that vast amount. The effect
of the creation of this great market exhibits itself in the Message
of Governor Yates, of Illinois, just now delivered, the followiug
extract from which is recommended to the careful consideration of
the farmers of the country : —
"As a State, notwithstanding the war, we have prospered beyond all
former precedents. Notwithstanding nearly two hundred thousand of the
most athletic and vigorous of our population have been withdrawn from the
field of production, the area of land now under cultivation is greater than
at any former period, and the census of 1865 will exhibit an astonishing
increase in every department of material industry and advancement ; in
a great increase of agricultural, manufacturing, and mechanical wealth ;
in new and improved modes for production of every kind ; in the substitu-
tion of machinery for the manual labor withdrawn by the war ; in the
triumphs of invention ; in the wonderful increase of railroad enterprise ;
in the universal activity of business, in all its branches ; in the rapid
growth of our cities and villages ; in the bountiful harvests, and in an
unexampled material prosperity, prevailing on every hand ; while, at the
same time, the educational institutions of the people have in no way de-
clined. Our colleges and schools, of every class and grade, are in the most
flourishing condition ; our benevolent institutions, State and private, are
kept up and maintained ; and, in a word, our prosperity is as complete
and: ample as though no tread of armies or beat of drum had been heard
in all our borders."
1
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It may be said, however, that the Government demand for food
has had much to do with the change for the better that is here ex-
hibited. Whence, however, has the National Treasury obtained the
means by which it has been enabled to pay its troops and buy their
food ? Whence have come the vast sums required for fitting out
our present enormous fleets ? Whence have come those required for
constructing roads in Illinois and other Western States ? Why is
it that the people have been, in time of war, enabled to do so much
when in the previous time of peace they could do so very little ?
For an answer to all these questions, my dear sir, allow me to ask
you to look to the following exhibit of the movements of the New
York savings banks in the last seven years ; —
No. of Banks.
Amt. of Deposits.
No. of Depositors
Jan. 1, 1858 .
. 54
$41,422,672
203,804
" 1859 . .
. 56
48,194,847
230,074
" 1860 .
. 64
58,178,160
273,697
" 1861 .
. 71
67,440,397
300,693
" 1862 .
. 74
64,083,119
300,511
" 1863 .
. 71
76,538,183
347,184
« 1864 .
. 71
93,786,384
400,194
We have here 400,000 little capitalists, the average of whose
savings is but $235, giving us a total of little less than a hundred
millions of dollars. Two of those banks are specially devoted to
the care of the funds of immigrants, and the following figures ex-
hibit the extent of their operations : —
Eesonrces.
No
of Depositors.
Jan. 1, 1860 .
. 2,442,048
10,360
" 1861 .
. 3,420,321
14,838
" 1862 .
. 3,471,777
14,365
» 1863 .
. 4,475,291
18,621
" 1864 .
. 6,056,600
24,151
Turning now to Massachusetts, we find the increase of deposits
in the four years, 1860-63, to have been more than a third of the
total amount deposited in all the long period that previously had
elapsed. The actual increase was $17,503,000, of which no less
than $12,150,000 took place in '62 and '63. The mere savings of
two States, in two years, thus present us with an increase of capital
exceeding $40,000,000, a sura that is one-half as great as that of
the whole British capital that, twenty-five years since, had been
applied to the building of the mills, workshops, ^nd warehouses,
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and to the creation of the machinery, required for the then gigantic
cotton manufacture.
When furnaces and factories are being increased in number labor
is in demand, wages rise, immigration grows, and the power of accu-
mulation increases ; and hence it is, that with every step in that
direction we witness a manifestation of greater power for further
progress. From '58 to '61, notwithstanding a large increase in the
number of New York banks, and consequent wide extension of their
field of operations, the increase of deposits was but $26,000,000.
The first year of the war brought with it a shock that caused sus-
pension of business, accompanied by great decline of wages, and the
result, as we see, exhibited itself in a large diminution of deposits.
The second year of war brought with it that revival of demand for
labor which had always previously attended the re-establishment of
protection, and with it came an increase of deposits amounting, in
the two succeeding years, to little less than $30,000,000. That
increase, too, was obtained without any extension of the field of
operations, the number of banks in the last year having been actu-
ally less than it had been two years before.
With the increased demand for labor consequent upon the creation
of a great domestic market for food the whole country has become
one great savings' bank, as a consequence of which the State and
Federal Governments have been enabled to collect thousands of
millions where before they could scarcely obtain hundreds, the peo-
ple meanwhile creating for themselves machinery of production and
transportation to an extent greater than ever before had been created
in the same period of time in any country of the world.*
It may be said, however, that there has been a European demand
for our provisions and our bread-stufTs. and such has certainly been
the case. Just at the moment when the Southern demand ceased
Providence was pleased, in mercy to us, to afflict the people beyond
the Atlantic with two successive crops both of which were much
below the average, and thus was created one of those unexpected
demands for which, under the British free trade system, our far-
* In 1857, there were in operation 26,210 miles of railroad. In 1861,
31,800, giving an average increase of 1,120 miles per annnm. Last year
there were 35,000, giving an annual increase of 1,067 per annum — that
obtained, too, at a time when the demand for services in the mills, mines,
and factories of the country, and in the field, had doubled, even where it
had not trebled the price of labor.
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mers are compelled so fervently and so frequently to pray, though
knowing well that short crops abroad must bring famine, distress,
and ruin to thousands and tens of thousands of men who, like them-
selves, have wives and children to support. The momentary
effect exhibits itself in the fact that in the three years ending June
30, 1863, our exports of the principal articles of food were as
follows : —
1860-61
1861-62
1862-63
Wheat
$38,313,624
142,573,295
$31,430,270
Flour .
24,645,289
27,534,677
25,458,989
Corn .
6,890,865
10,387,383
3,321,526
Pork .
2,609,818
3,980,153
4,334,775
Hams and bacon
4,729,297
10,004,521
15,775,570
$77,188,893
$94,480,029
$80,321,130
What, however, were the prices at which these commodities were
given to the European world ? What was the great bonus that
even then, in times of scarcity, was paid to American farmers in
return for closing up in 1846 a market among our miners of coal
and iron, lead and copper, that would before that day have amounted
to thousands of millions of dollars ? Let us see.
As given in the Reports of Commerce and Navigation, the export
prices, reckoned for the first year in gold, and for the subsequent
ones in paper, were as follows : —
1860-61
1861-62
1862-63
Wheat, per bushel
. $1 22
$1 29
$1 33
Flour, per barrel .
. 5 00
5 70
6 40
Corn, per bushel .
62
55
66
Pork, per barrel
. 17 00
13 00
13 00
Hams, &c., per pound .
10
8|
lOJ
Deducting from these prices the heavy charges of transportation
and converting the balance into gold it must be clearly seen that it
is not in that direction we are to seek the cause of the improvement
now observed in the condition of the agricultural population of
IlKnois and other loyal States. Where then shall it be sought ?
In the direction of the production of commodities that do not bear
transportation, and that are dependent for a market upon the
domestic demand alone. Read over, my dear sir, the passage above
given as descriptive of the condition of Illinois, and you will see
that it indicates demand for commodities whose bulk, or whose de-
licacy, forbids transportation. Potatoes and turnips, of which the
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earth yields by hundreds of bushels to the acre, cannot be raised
where the domestic market has no existence. When, however, the
coal mine, the lead mine, or the iron ore mine, comes to be opened,
the market is at once created, and jt extends itself with every new
furnace, every new factory, every new rolling mill, until at length
the farmer everywhere obtains the power to determine for himself
whether to raise thousands of bushels of potatoes, or hundreds of
bushels of wheat ; and then it is that the Declaration of Independ-
ence becomes to him something more than a mere form of words ;
then it is that it becomes a reality and a blessing.
That independence, however, is precisely what the ''wealthy
English capitalist" does not desire that he shall obtain. What he
desires is, that the distant farmer shall have no market near
him ; that he shall be compelled to limit himself to the produc-
tion of commodities of which the earth yields little, and that can,
therefore, go to that distant market in which Russian, Polish,
German, Egyptian, and American food producers are to contend
with each other as to which shall sell most cheaply — then again
competing with each other for raising the prices of all the com-
modities they need to purchase. In this manner it is that he buys
skins at sixpence while selling tails at a shilling. By this it is
that he is enabled to put into his own pocket three-fourths of the
produce of the labor of those poor and distant serfs to whom occa-
sionally, and as a great favor, he lends a little of his surplus profits
to be applied to the making of new roads by means of which popu-
lation may be more widely scattered, while he himself is thereby
relieved from the danger of any increase in the competition fOr the
purchase of wool, rags, or corn, or for the sale of cloth and iron,
the commodities of which he is the owner.
The market whose prices for food regulate those of all the world
is that of Great Britain. Whatever raises prices there raises those
of New York and Boston, Chicago and St. Louis. How trivial
was the quantity that in the first three years of the war was absorbed
by that market, and how low were the prices obtained, have above
been shown. Why were prices, at a time of real scarcity, so very
low? Because we had so much to sell. Had only one-fourth of
what we sent been retained at home for the consumption of men
engaged in mining coal and ore and making, iron, while another
fourth had been retained for the supply of men, women, and children
coming from abroad to work in our mines, our factories, and our
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fields, we should have obtained almost as much for the remaining
half as we did obtain for the whole. That, however, is not all.
Had we sent but one-half the quantity, and had the difference of
price thus produced been but a single shilling sterling per bushel,
that difference would have been felt by every bushel of the whole
thousand millions produced in the loyal States, giving to be divided
among their producers an additional two hundred and fifty millions
of dollars, and enabling them to buy more cloth and more iron,
and thus to live better, while so improving their machinery of pro-
duction as to give them greatly more to sell in succeeding years.
Had it made, as it certainly would have done, a difference of
eighteen pence a bushel, the difference to our farmers — leaving
altogether out of view corresponding differences in the prices of
all their other products — would have been little less than four
hundred millions. That amount, at the least, is it that they have
paid in each of the last three years, for having, during a long period
of years, so repeatedly crushed out the cotton and wjoollen manu-
factures, the coal, iron, and other important branches of industry;
and in that way it has been that they have built up, at their own
cost, ^'the large capitals'' which have so systematically been used
by our British /riencZs as "the great instruments of warfare against
the competing capital of other countries.'' They, themselves, make
the whip whose lash they so severely feel. They, themselves, fashion
the club by means of which they are struck down at the feet of their
foreign masters. They, themselves, by tolerating among their Re-
presentatives a perpetual agitation of the British free trade ques-
tion,-are now paving the way for a return to a state of colonial
subjection greater than has existed at any period since the peace of
1^83.
For proof of this allow me now to request you to look at the
consequences that must inevitably follow from the recent action of
your House in regard to the paper manufacture. Under that
action printing paper can no longer be made in this country, and
we have now to choose between going abroad for $25,000,000 of
paper, or dispensing with our usual supplies of journals and of
books.
Under the action of the last session we shall, whenever the price
of gold falls, be obliged to go abroad for, as I believe, the whole of
the iron now produced, and the whole of the coal now employed in
making iron. Taking these two items together, and placing them
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at a gold value of only $150,000,000, the question now arises as to
how we are to pay for them ? Seeking an answer to this question
we are led naturally to look to the state, in regard to prices and
demand, of the great regulating market of the world, and, fortu-
nately, one of the New York journals of the day furnishes, in an
extract from a Liverpool letter, all the information that we need,
as follows : —
"The wheat market continues without a symptom of revival. If your
supplies were to fall off Germany would at once begin to increase her con-
signments to us. The possibility of a rally in our home prices is thus effec-
tually prevented, and the year closes with the price of bread at a point lower
than has been known within modern experience."
Germany and America thus contending for the supply of a dimi-
nutive market, prices are ''lower than have been known within all
modern experience," and the market presents no ''symptom of re-
vival." In this state of things it is, that we are arranging for
drawing from Europe hundreds of millions of dollars worth of
paper, coal, and iron, to be paid for by crowding on the British
market all the flour and all the pork and beef now employed in
fabricating the first, and in mining and converting the others!
Such being the tendency of all our present legislation, am I, my
dear sir, much in error in asserting that, often as our farmers have
been "brayed" in the British free trade "mortar" their "foolish-
ness" has not yet "departed from them?"
All that has thus far been done towards increasing our depend-
ence on the diminutive British market constitutes, however, but one
of the steps in that direction. The repeal of the paper duty has
rendered necessary a movement towards the abolition of all duties
affecting the materials required for the paper manufacture. Of
these soda ash, of which our consumption is probably 40,000 tons,
is one of the most important. Why have we not made it? Why
do we not now make it? Why is it that the Iowa farmer has been
using his corn as fuel when there were thousands and tens of thou-
sand's of European men who would gladly have come and eaten it
while engaged in converting into soda ash the coal, the lime,
and the salt that underlie so much of the land of the Mississippi
Yalley ? Because the country gives to the capitalist no security
that he shall not be crushed out of existence after having expended
hundreds of thousands of dollars in the erection of works required
for the conversion of raw materials into the commodity we so
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greatly need ! In the absence of such security, and in the presence
of agitation such as has now succeeded, so far as your House, my
dear sir, is concerned, in crushing out one of the greatest and most
fundamental of our industries, we shall be required to continue year
after year to give to our masters, the '^ wealthy capitalists'' of Eng-
land, corn in its natural state at a few cents per bushel, buying it
then back again. in the form of bleaching powders at pence per
pound — thus giving the skin for sixpence, and repurchasing the
tail for a shilling.
It being required of us that we now abandon the protective
system, and look once more to Europe for that great market which,
as we were assured in 1847, was before this time to take from us
''breadstuff's" to the annual amount of hundreds of millions, it may
be well here to inquire what it is that that system has done for our
farmers in the short period that has elapsed since the abdication of
Southern masters gave to the North once more the power of self-
protection.
The total export from the port of New York, exclusive of specie,
in the week ending January 24, is given by the Evening Post at
$6,333,663. Of this there appears to have been of breadstuffs and
provisions going to those European markets from which we are
likely henceforth to be obliged to draw our paper and our iron, as
follows : —
Beef 500 tierces.
Flour 110 barrels.
Bacon 49,228 pounds.
In the same week the exports from Boston amounted to $481, 44T,
in which were included 151 tubs of butter for Liverpool. Of an
export, from those two ports, of nearly seven millions, the whole
amount of breadstuff's and provisions for Europe did not exceed
$30,000, or less than one-half of one per cent. How the remainder
of the vast sum was made up will be seen on an examination of the
following list of exports to the Argentine Republic, which presents
a very fair specimen of the whole, as given in the Shipping List: —
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Sewing Machines .
cases
142
Drugs
pkgs. 185
Hoop Skirts .
21
Glassware
cases 81
Furniture
280
Hardware
. pkgs. 438
Clocks
182
Petroleum
. galls. 3,158
Manufactured Tobacco
lbs
17,975
Wax
bbls. 10
Oars
pes
500
Naval Stores .
pkgs. 20
Oak . . .
235
Hops
. bales 38
Varnish
bbls
26
Woodenware . .
pkgs. 126
Spirits Tar .
galls
50
Pepper
bags 496
Shoe Pegs
bbls
55
Cloves
. bales 100
Nails .
kegs
, 306
Lumber .
. feet 470,896
Perfumery .
cases
75
These articles, my dear sir, are merely the food of the laborer in
another and higher form ; and thus it is that, to the weekly extent of
millions of dollars, our farmers are enabled, by means of a diversified
industry, to relieve themselves from the necessity for forcing their
products on the already glutted market of England. The total
export of breadstuffs to Great Britain and Ireland, in the last five
months, as given in a table now before me, has been as follows : —
Flour
Wheat
Corn
59,998 barrels.
1,305,183 bushels.
56,933 bushels.
To the Continent there have gone 2,669 barrels of flour, and 68,521
bushels of wheat. Such is the great European market to which
we are now advisedj^o look for all our supplies of cloth, paper, and
iron ! Such is the market in whose favor we are now required to
sacrifice coal and iron industries whose total products, in their vari-
ous forms, now exceed four hundred millions of dollars, nearly the
whole of which vast sum goes, directly or indirectly, to the men
who are employed in clearing the land or cultivating it !
Why, however, is it that so little food can be spared for Europe?
Because the domestic market has already become so large that
prices are above the exportation standard. Let us go ahead in
the direction in which for three years past we have been moving —
let us give to the makers of paper and the smelters of iron ore that
security without which they dare not enlarge their works or increase
their number — and the day will not then be far distant when we
shall be importers of wheat, instead of exporters of it, making a
market for all the products of Canada and enabling our own farmers
and landholders to become rich and independent, instead of being,
as in all time past they have been, the mere serfs of those ''wealthy
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capitalists" whose first wish is that food may become cheaper, and
cloth and iron dearer.
Forty years since, General Jackson asked of his countrymen the
important question, '' Where has the American farmer a market
for his surplus products V In answer thereto he spoke as follows,
and nothing more accurate was ever written : —
*' Except for cotton, he has neither a foreign nor a home market.
Does not this clearly prove, when there is no market either at home
or abroad, thai there is too much labor employed in agriculture,
and that the channels of labor should he multiplied"^ Common
sense points out at once the remedy. Draw from agriculture the
superabundant labor, employ it in mechanism and manufactures,
thereby creating a home market for your breadstuffs, and distributing
labor to a most profitable account, and benefits to the country will
result. Take from agriculture in the United States six
HUNDRED THOUSAND MEN, WOMEN, AND CHILDREN, AND YOU AT
ONCE GIVE A HOME MARKET FOR MORE BREADSTUFFS THAN ALL
Europe now furnishes us. In short, sir, we have been too- long
subject to the policy of the British merchants. It is time we should
become a little more Americanized, and, instead of feeding the
paupers and laborers of Europe, feed our own, or else in a short
time, by continuing our present policy, we shall all be paupers our-
selves."
France and England have pursued the policy here recommended,
and they are now the greatest exporters of food in the world, the
annual amount, with each, counting by hundre^ of millions of dol-
lars. They, however, combine hundred-weights of food with pounds
of wool, silk, and cotton, and thus enable the former readily to
make its way throughout the outside world. We are now, in pro-
portion to our numbers and resources, the smallest food exporters
of the world, because we insist on sending the raw materials of
cloth to be combined together in other and wiser countries.
The policy recommended by General Jackson was that of the
protective period from 1828 to 1834, at the close of which we paid
off the last remnant of our national debt. It was that of the
period from 1842 to 1847, which commenced with a scene of almost
universal ruin, and closed with an exhibit of prosperity such as the
world had never before seen. It is the policy by means of which
our farmers are now relieved from all necessity for forcing their
products on foreign markets, to be there taken, at prices to be fixed
by themselves, by ''wealthy capitalists, '^ who pay for them in cloth
and iron, at prices also fixed by themselves.
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lOT
For a portion of this relief they have been indebted to the demand
created by large bodies of men employed in carrying muskets, but
this is so far from being opposed to the view abote presented that it
furnishes proof conclusive of its truth. Change those men into
miners and puddlers, producers of silks and cottons, watches and
locomotives, and their demands for the various products of the earth
will be greater than now they are. As it is, the farmer profits only
by an increase in the prices of what he has to sell. As it then
would be, he would add thereto a decrease of price in regard to all
that he required to purchase. The truth of the Jacksonian doctrine
is, thus, thoroughly demonstrated by the facts now presented in the
consumption of our fleets and armies. As human pursuits become
diversified land acquires value and the farmer becomes rich and in-
dependent.
Who, now, are the men who have combined together for the
destruction of the great paper, coal, and iron industries, and for the
reduction of the farmer to his former dependence on British mar-
kets ? Let us see. They are —
I. Railroad owners, who, in the last three years, have taxed the
farmer to the utmost of their ability by increasing the charge for
transportation :
II. British agents who look to reduction in the price of food and
augmentation in the price of iron for increase of their commissions :
III. Secessionists at home and abroad, in and out of Congress —
men who look to bankruptcy of the National Treasury as the most
certain means of obtaining elevation for themselves.
Against these should now be banded together —
I. Every farmer who desires to see the tax of transportation
diminished and the value of his land increased :
II. Every laborer who desires to find himself in the condition of
one of the owners of the land :
III. Every landholder who sees in liberal reward of labor a
stimulus to that immigration by means of which the number of pur-
chasers of land must be increased :
lY. Every man who sees that land increases rapidly in value as in-
dustry becomes more and more diversified, while declining as rapidly
when furnaces and mills are closed and diversification dies away :
Y. Every holder of a Government note, or bond, who sees that
it is the Internal Revenue alone to which he and others like himself
must in future look for payment of their interest :
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YI. Every lover of his country who sees that with every increase
in the domestic commerce there is an increase in the number of the
threads by means of which the Union is to be held together :
YII. Every man who appreciates the fact that it is to that British
free trade by means of which we have been compelled to look to a
distant market as the one in which to make all our exchanges, that
we have been indebted for the loss of property and of life that has
resulted from the great rebellion ; and,
YII I. Every man who feels as an American should feel in. refer-
ence to the conduct, throughout the past four years, of that British
people which teaches everywhere ''free trade*' as the most efiScient
means of securing a monopoly of the machinery of transportation
and conversion for the world at large.
If this nation is ever to become really independent ; if it is ever
to become Americanized ; if it is ever to occupy that position in
the world to which the vast amount of mineral wealth placed at its
command so well entitles it; if it is ever to cease to be a mere puppet
in the hands of foreign agents ; if it is ever to be placed in a posi-
tion to perform the duties of its great mission to the poor and
oppressed throughout the earth ; its people must learn that in the
real and permanent interests of all the portions of society there is
a perfect harmony, and that of all who should desire the establish-
ment of that certain protection which shall authorize the capitalist
to open mines, build furnaces, improve water-powers, and erect mills,
there are none whose interests look so much in that direction as do
those of the landowner and the farmer. All, however, are greatly
interested ; all should learn to appreciate the advantages that must
result from combination for relief from that foreign domination
under which we have so long and so severely suffered ; and all
should study the admirable lesson taught in the following fable by
our old friend ^sop : —
"An old man had many sons, who were often falling out with
one another. When the father had exerted his authority, and used
other means in order to reconcile them, and all to no purpose, at
last he had recourse to this expedient : he ordered his sons to be
called before him, and a short bundle of sticks to be brought; and
then commanded them, one by one, to try if, with all their might
and strength, they could any of them break it. They all tried, but
to no purpose; for the sticks being closely and compactly bound up
together, it was impossible for the force of man to do it. After
this, the father ordered the bundle to be untied, and gave a single
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stick to each of his sons, at the same time bidding him try to break it ;
which, when each did with all imaginable ease, the father addressed
himself to them to this effect: 'O my sons, behold the power of
unity ! for if you, in like manner, would but keep yourselves strictly
conjoined in the bonds of friendship, it would not be in the power
of any mortal to hurt you ; but when once the ties of brotherly
affection are dissolved, how soon do you fall to pieces, and are liable
to be violated by every injurious hand that assaults you !' ''
The men of the North have shown their appreciation of this
lesson by the determination they have manifested to maintain the
tJnion of the States. Let the people of all those States show their
appreciation of it by combining together for securing permanently
to the farmer such a market for his products as shall free him wholly
from the tyranny of the ''wealthy capitalists" abroad; let them
determine that American food shall go to the production of all the
cloth, all the paper, and all the iron they need to use, and we shall
then have discovered the true and certain mode of outdoing England
without fighting her.
In another letter I propose to examine the railroad question,
remaining meanwhile, with great regard and respect,
Hon. Schuyler Colfax.
Philadelphia, Jan. 30, 1865.
Yours, very truly,
HENRY C. CAREY.
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THE EAILROAD QUESTION.
LETTER ELEVENTH.
Dear Sir : —
The man who habitually retains himself in a position to be
obliged to seek for purchasers of his labor or its products rarely
fails to reap ruin as its result. He who, on the contrary, so places
himself as to be enabled to compel purchasers to come to him, finds
his power of accumulation increase with each succeeding year, and
ends with colossal fortune.^ The first is that one in which the
American people, guided by British agents, have always kept them-
selves, and we have the result in a war that must have brought
universal ruin had it not brought with it also emancipation from
that British free trade policy whose effects are so well described by
General Jackson in the admirable letter already given. The second
is that in which the people of France, under a system of protection
maintained with a persistence that has no parallel in history, have
placed themselves.^ The whole world is compelled to go to them to
buy, and they fix the prices at which they choose to sell. The world
is compelled to go there to sell, and they are thus enabled to fix the
prices at which they choose to purchase. The result exhibits itself
in a most extraordinary increase in the value of lands and houses,
the figures of which I have seen but cannot at the moment find.
Well, however, do I recollect that they were of a character calcu-
lated to excite astonishment even in one who had witnessed the
effect on western lands of a steady flow of emigration from the
East.
The first has been governed by that class of men of which Mr.
Secretary Walker is the type ; that class which proclaims that this
is naturally "an agricultural country,'' and that we must seek
abroad a market for our ''breadstuffs and provisions''— thereby
so limiting our people in their modes of employment as to make
the country little more than a mere puppet in the hands of foreign
traders. The other has been, in this respect at least, governed by
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men of whom the great Colbert is the type — men who have clearly
seen that national independence was to be achieved by means of
bringing the consumer to take his place by the side of the producer,
and thereby giving value to both land and labor. The results ex-
hibit themselves in the fact that France now controls the move-
ments of all Europe, while the people of this country, with natural
advantages a thousandfold greater, and almost as large a popula-
tion, now find themselves compelled to abandon the Monroe doctrine
and fight for national existence — France, meanwhile, obtaining
command of our immediate neighbor, Mexico.
Shall we ever do better ? It may well be doubted. Often as our
farmers, our merchants, and our transporters have been ''brayed''
in the British free trade ''mortar," their "foolishness" has not yet
"departed from them;" and, judging from recent proceedings in
Congress, it would seem that, sad as has been our experience, they
are little likely even now to profit by it. Nothing, as it would
seem, can open their eyes to a perception of the great fact, that in
the real and permanent interests of the West and the East, the
North and the South, as well as in those of the ship-owner, the rail-
road proprietor, the miner, the iron-master, the land-owner, and the
laborer, there is a perfect harmony, and that it is absolutely im-
possible to injure any one of them without at the same time injuriously
affecting all the rest. Blind to this are they all, and, as a conse-
quence of this it is, that we find western land-holders and laborers
combining with railroad managers for promoting the adoption of a
policy that each and every one of them would bitterly denounce
could he but be persuaded to pause a little in his course and study
carefully what had been the effect in the past of measures similar
to those whose adoption he now so earnestly advocates.
Of all, there are none who have shown themselves so blind to
their true interests as those same railroad managers. All experience
teaches that roads are profitable in the ratio borne by way to through
business, and unprofitable in the ratio borne by through to way busi-
ness. Why is it so ? Because with the growth of this latter they
becopae independent ; whereas, with increase in the proportion borne
by through business they become more and more dependent. In
proof of this we may take the fact, that such has been the compe-
tition for this latter that produce has, on many occasions, been
forwarded from Chicago to New York more cheaply than from
Buffalo, and more cheaply from this latter than from either Roches-
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ter or Syracuse. In this manner they first offer bounties on emigra-
tion from the older States, and then find themselves compelled to
enlarge their capital and extend their roads with a view to retain
their business. Common sense might, as one would think, teach them
that by aiding in the development of our great mineral resources
they would be creating a local traffic that could be carried on at
small cost and with great profit to themselves ; yet have they in-
variably been found combining with British agents in opposition to
such development, thereby imposing upon themselves a necessity for
still further extension of their lines, with steady diminution in their
power to pay their stockholders.
Our railroad history covers a period of only five and thirty years,
and it may now be not unprofitable to cast our eyes back over that
period with a view to ascertain what are the lessons for the future
that may be thence deduced. '
In 1832, the railroad interest insisted upon depriving our furnaces
of the manufacture of railroad bars. In the ten succeeding years
many roads were made, and all with British bars bought at the
highest prices. As a consequence the cost of roads was great, and
at the close of the free trade period in 1842 the railroad interest
was in a state of almost universal ruin. Why was it so ? Because
the road-makers had united with British traders in urging upon the
country a policy whose effect had been that of making them yearly
more and more dependent upon a through trade that could not be
made to yield a profit. The domestic market for food had been
greatly lessened, while that of Europe had failed to grow.
The tariff of 1842 imposed a heavy duty on railroad bars, and
then for the first time was their manufacture commenced on this
side of the Atlantic. Iron generally being well protected the pro-
duction rose in half a dozen years to 800,000 tons, and the con-
sumption to 900,000. Labor being everywhere in demand, im-
migration trebled in that brief period. Towns and villages increased
in number and in size. The local traffic therefore grew, and railroads
became once more profitable to their proprietors.
Taking no lesson from experience railroad and canal owners
united in beating down protection, and giving us Mr. Walker's
free trade tariff of 1846. How they profited of this may be judged
from the following figures giving the receipts of some of the princi-
pal works in the period from 1842 to 1849 : —
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New York
Bait, and Ohio
Pennsylvania
Total.
canals.
railroad.
canals.
1842,
1,749,000
426,000
903,000
3,078,000
1844,
2,446,000
658,000
1,164,000
4,268,000
1846,
2,756,000
881,000
1,357,000
4,994,000
1847,
3,635,000
1,101,000
1,587,000
6,323,000
1848,
3,252,000
1,231,000
1,550,000
6,033,000
1849,
3,266,000
1,241,000
1,580,000
6,087,000
Under protection the receipts more than doubled, as here is shown.
As the British free trade system became more fully operative they
declined, thus presenting a striking commentary on Mr. Walker's
assertion, made but two years previously, that under a free trade
system " our own country, with its pre-eminent advantages, would
measure its annual trade in imports and exports by thousands of
millions of dollars.''
At that moment, however, California had already begun to fur-
nish to the world its golden treasures, thus making a market for
labor under which immigration for several years rapidly increased.
That period, however, terminated with 1854, and thenceforward
railroad property, as a natural consequence of continued railroad
agitation for the abolition of the duty on railroad iron^ rapidly
decreased in value, as is shown by the following figures : —
Baltimore and Ohio .
Boston and Worcester
New York and Erie
Cleveland and Pittsburg
Michigan Southern
Cincinnati and Dayton
Pennsylvania Central
Camden and Amboy .
Boston and Maine
From that date to the opening of the rebellion immigration de-
clined ; internal development almost ceased ; and railroad property
so much depreciated that the average value of the New York Cen-
tral, Erie, Hudson River, Reading, Michigan Central, Michigan
Southern, Rhode Island, Cleveland and Toledo, Illinois Central,
and Galena and Ohio roads was only forty-two per cent.
The war came, bringing with it protection to the farmer, accom-
panied by an increase in the value of railroad property, as exhi-
bited in the following figures giving the average prices of the several
roads last above referred to : —
1852-3.
1855.
98
56
105
87J
85
52
93
70
118
97
102
85
93
88
149
128
102
94
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January, 1855
1860
1862
1863
1864
42
56
51
95
143
Seeking now the cause of the vast change that is here exhibited
we find it in the following passages from Reports just made by two
important Western roads — the Southern Michigan and the Cleve-
land and Pittsburg Railroad.
From the first we learn that —
^' Although the decline on the through business is at the rate of
$30,000 to $40,000 per month, so great has been the increase in
local traffic that the aggregate earnings for January, 1865, show an
increase of about $e50,000 over the corresponding month last year.
Although there has been no diminution in the number of employees,
the aggregate number of miles run by passenger trains is now 5000
per week less than it was before the issuing of the passport order.
There is, therefore, a considerable saving in running expenses.^'
And from the second that —
" The great increase of freight upon the road has come in a very
important degree from two articles of traffic which may be considered
the staple of your road, naturally and legitimately belonging to it.
These articles are coal and iron ore of Lake Superior. The coal
interest was one of the principal agencies in planning and building
this road, and those early projectors of the enterprise have always
looked to the development of the coal mines on the line of the road
as a sure and steady means of remuneration. The coal trade has
from the first held an important place among the various sources of
revenue to your road. It has steadily increased with the progress
of years, and as manufacturing has been more extensively under-
taken, and as new demands for coal from regions before unsupplied
have arisen, the transportation over your road has been greatly
increased in amount.''
What is true of these two roads, is almost equally so of those of
the country at large, the existing prosperity of the whole railroad
interest having come as a natural consequence of great develop-
ments of mineral wealth. Take, for instance, petroleum, of which
to the extent of $46,000,000 was sent to market in the past year,
and see, my dear sir, how large have already become its contribu-
tions to railroad revenues. Look further, however, and see how
enormous they must become when Ohio, Virginia, and other States
shall have sunk their wells and erected their engines, and when refin-
eries shall, at the place of production, fit it for cheap transportation
to the remotest corners of Maine in the Northeast and Texas in the
Southwest, Florida in the Southeast and Nevada in the Northwest;
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and then endeavor to satisfy yourself to what extent it is that every
road in the country is interested in the successful prosecution of the
great work of development that has but now commenced. Take
next the 13,000,000 tons of coal now mined, and follow them in
their travels throughout the Union, paying toll directly to roads in
the East and roads in the West, and indirectly to every one in the
whole extent of the loyal States. Add now to them the 1,300,000
tons of pig metal at present made, and follow them, in all their
various forms of railroad bars, stoves, pipes, knives, and engines,
and then determine to what extent they have contributed to give to
the roads of the country their present value.
Study next, I pray you, the perfect harmony of all these various
interests, and satisfy yourself how shortsighted are the men who
believe in national discords. What is it that has so suddenly given
an almost fabulous value to the great oil region of the West ? Is
it not the almost immediate presence of the great machine-shops
of Ohio, Indiana, Illinois, and Pennsylvania? What would be its
value were its owners obliged to seek in Birmingham for engines ?
It would have none whatsoever. To whom, however, are we in-
debted for those shops ? Is it not to men who have sunk mines
and built furnaces, others who have mined coal and ore, and still
others who have converted raw material into pigs and pipes?
That it is so, cannot be questioned. The harmony of all those
interests is absolute and complete.
Equally so is that which exists between the men who make and
those who need to purchase the railroad bar. Many millions of
dollars worth of oil go to market, there to be exchanged for sugar
and coffee, cloth, iron, and the thousand other commodities needed
for a population that is increasing in wealth and numbers, and at
every stage of their progress they contribute towards railroad divi-
dends. So, too, with the iron and the coal. I have now before me
the accounts of a single iron establishment that paid last year, in
railroad tolls, no less a sum than $200,000. Judging from this,
at how many millions might we safely fix the contributions of coal
and iron to the maintenance of the railroad interest?
To enable us to form an accurate judgment of the amount of
such contributions by the great fundamental industries, let us for
a moment look to the effect that would at once result from
their annihilation. Would it not certainly diminish by two-thirda
the real value of every railroad in the Union? That it would
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do so, cannot be questioned. What, then, would be the effect were
we in the next seven years to double, even if we should not treble,
the product of our mines, our furnaces, our rolling-mills, and our
wells ? Could it fail to be that of giving to all railroad property
a fixed and certain value, even when estimated in gold, greater than
it ever yet has known ? That it could not fail to do so, is abso-
lutely certain. That you may now be led, my dear sir, to arrive, in
this respect, at the same belief with myself, I would ask you to look
to the fact that a coal mine is a vast magazine of power; that thou-
sands of tons of coal can be made to do the work of hundreds of
thousands of men ; that in the extent and variety of metallic de-
posits we are ahead of the whole of Europe combined; that power
ALONE is needed for bringing to light the vast treasures of the iron
mountains of Missouri on the west, and of the Adirondack on the
east — of the great iron and copper beds of the shores of Lake Su-
perior— of the wealth-abounding hills of Tennessee — of the great
lead deposits of Illinois and Iowa — of the coal, iron, and gold
abounding districts of Virginia — of the zinc and iron deposits of
New Jersey — and of the granite hills of New England ; that the
power at our command is equal to that of almost the whole earth
combined ; that that now used in Great Britain alone is estimated
as being equal to the labor of 600,000,000 of men ; that by a proper
application of our energies we might within the next decade go far
beyond even that vast amount ; that production increases almost
geometrically as the power applied increases arithmetically ; that
exchanges increase with the increase of production; that the power
to contribute to the maintenance of roads increases with a rapidity
far exceeding that of production ; and then determine for yourself
how magnificent is the future that will open itself to the eye of
every railroad manager when he and his fellow-proprietors shall
have arrived at the conclusion, that there is a perfect harmony ia
the interests of the men who make iron and those who need to use
it, and that an enlightened self-interest demands of thenf that they
shall ask of Congress the establishment of such a revenue system as
shall give to the capitalist that certainty in regard to the future
which is needed for enabling us, before the lapse of another decade,
to place ourselves side by side with Great Britain in the production-
of many of the most important metals, and before the close of
another to leave her far behind, thus giving to the farmer a market
near at hand for all his products.
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The mind is lost in contemplation of the marvellous amount of
wealth and power that has by a beneficent Creator been placed at
our command. Still more, however, is it lost in wonder when
studying the slow degrees by which we have arrived at the idea that
prosperity among our people, freedom to the slave, and power and
influence among the nations of the world, were to come to us only
as a consequence of the application of that vast power to the de-
velopment of that wonderful wealth. More than thirty years since,
at the close of the protective period which began in 1828, our con-
sumption of iron was 300,000 tons. Ten years later, at the close
of a long and dreary free-trade period, with a population one-third
greater, the consumption was still but little more. Five years
later, at the close of the protective period of 1842, our production
had already trebled, and so great had become the demand, that the
import of foreign iron was nearly as great as it had been in 1842.
Ten years still later, with a population again a third increased, and
with all the advantage of California gold developments, our pro-
duction, under the British free-trade system, had diminished, while
our total consumption had scarcely at all increased. Of the four
years that have since passed by, one was a period of universal pros-
tration, and yet, in the three that have succeeded our consumption
has been carried up to a point nearly one-third higher than that at
which it stood at the outbreak of the great rebellion. These are
remarkable facts, and with them is connected another series of
phenomena of the highest importance to railroad proprietors, which,
however, seems to have escaped their notice. Whenever the domes-
tic production of iron has been advancing railroad property has
paid good dividends, while dividends have always declined as
furnaces and rolling-mills became idle and their proprietors
became bankrupt. In 1832, the first of the protective periods
above referred to, railroads had scarcely yet made their appearance
on the stage, but transporters of every description were highly
prosperous. In 1842, at the close of the first of the above-named
free-trade periods, furnaces were closed and railroad companies were
bankrupt. In 1847, the second protective period, ironmasters were
prosperous and railroad companies paid good dividends. In 1854,
under a temporary California excitement, railroad stocks were high
and ironmasters were building rolling-mills. In 1860, at the close
of the last free-trade period, railroad stocks were selling, as has
been already shown, at an average of 42 per cent., and mills, mines,
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and furnaces were everywhere closed. To-day, after three years of
protection, all is changed, ironmasters having doubled their pro-
duction and thus enabled railroad stocks to go again to par.
The direct connection between the road and iron interests is here
so clearly obvious that it is almost marvellous that the former
should so long have failed to see it. More wonderful is it, how-
ever, that seeing what has but now occurred, they should yet con-
tinue so blind to their true interests as to array themselves in oppo-
sition to any measure on the part of Congress that shall tend to
give that security for the future without which the capitalist will
not give his time and his means to the opening of mines, or to the
building of furnaces and mills. To induce him so to apply his
powers he must have protection against that system so well described
in an extract from a Parliamentary Report to which your attention
has already more than once been called, and which, as I have said,
should be read day by day, week by week, month by month, and
year by year, by every man who desires to see the Union maintained,
with constant increase in the power of the nation to command the
respect of the other communities of the earth. It is as follows : —
'' The laboring classes generally, in the manufacturing districts of
this country and especially in the iron and coal districts, are very
little aware of the extent to which they are often indebted for their
being employed at all to the immense losses which their employers
voluntarily incur in bad times, in order to destroy foreign competi-
tion, and to gain and keep possession of foreign markets. Au-
thentic instances are well known of employers having in such times
carried on their works at a loss amounting in the aggregate to
three or four hundred thousand pounds in the course of three or
four years. If the efforts of those who encourage the combinations
to restrict the amount of labor and to produce strikes were to be
successful for any length of time, the great accumulations of capital
could no longer be made which enable a few of the most wealthy
capitalists to overwhelm all foreign competition in times of great
depression, and thus to clear the way for the whole trade to step
in when prices revive, and to carry on a great business before foreign
capital can again accumulate to such an extent as to be able to
establish a competition in prices with any chance of success. The
large capitalists of this country are the great instruments of warfare
against the competing capital of foreign countries, and are the most
essential instruments now remaining by which our manufacturing
supremacy can be maintained; the other elements — cheap labor,
abundance of raw material, means of communication, and skilled
labor — being rapidly in process of being equalized."
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The wealthy British "capitalists^^ here described have their
agents everywhere, and everywhere prepared for combination with
every little private or local interest for the removal of grievances of
which they know their masters and themselves to be the cause.
What they desire, as they know full well, is that food may be cheap
and iron high in price. What we desire, and what by means of
protection we are seeking to obtain, is that the farmer may from
year to year be enabled to obtain more spades and ploughs, and
better means of transportation, in exchange for less and less of food.
When, however, the farmer complains of the low price of corn, he
finds the agent always at hand, Mephistophiles-like, to whisper in
his ear that but for protection spades and ploughs would be cheaper,
while food would command a higher price. When the railroad
manager seeks to buy iron, he points to the low price at which
British iron might be purchased, wholly omitting to call the atten-
tion of his hearer to the facts, that British iron is always cheap
when American people build furnaces, and when American rail-
road companies make good dividends, and always dear when Ame-
rican furnaces have been blotted out of existence, when their
owners have been made bankrupt, and when American railroad
stocks are of little worth. In proof of this, I now give you the
following facts as they present themselves in the Reports on Com-
merce and Navigation for the several years above referred to : —
At the close of the protective period which commenced in 1828
amd terminated in 1833 — that one in which for the first time the
iron manufacture made a great forward movement, and therefore
the most prosperous one that the country had ever known, the
price at which British bar iron, rails included, was shipped to this
country, was forty dollars.
Eight years later, in 1841, when our mechanics were seeking
alms — when our farmers could find no market — when furnaces
and mills were everywhere closed, and their owners everywhere
ruined — when States were repudiating, and the National Treasury
was wholly unable to meet its small engagements — the shipping
price of British bars had been advanced to fifty dollars.
Eight years later, in 1849, after protection had carried up our
domestic product to 800,000 tons, and after the British free trade
tariff of 1846 had once again placed our ironmasters under the
heel of the " wealthy English capitalist,^' we find the latter ener-
getically using that potent ^'instrument of warfare" by means of
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which he "gains and keeps possession of foreign markets," and
supplying bar iron at thirty dollars per ton. In what man-
ner, however, was the railroad interest paying for a reduction
like this, by means of which they were being enabled to save on
their repairs a tenth or a twentieth of one per cent, on their re-
spective capitals ? Seeking an answer to this question I find in the
Merchants 3Iagazine a comparison of the prices in February, 1848
and 1850, of thirteen important roads, by which it is shown that in
that short period there had been a decline of more than thirty
per cent. ! This would seem to be paying somewhat dearly for the
whistle of cheap iron ; and yet it is but trifling as compared with
information contained in a paragraph which follows in which are
given the names of numerous important roads, whose cost had been
very many millions of dollars, but which "from prices quoted, and
those merely nominal, seem to be of little or no value — not enough,
nor one-fourth enough, to pay interest on the sums advanced for
their creation."
At the close of another term of similar length, say in 1857, we
arrive at a scene of ruin more general than any that had been wit-
nessed since the closing years of that British free trade period which
terminated with the universal crash of '42. How very low were
then railroad stocks has been already shown. What, however, was
the price at which British ironmasters were willing, now that they
had so effectually crushed out competition, to meet the demands
of railroad managers ? Were they still willing to accept $30 per
ton as the shipping price ? Did they then manifest any desire to
help the friends who had so largely aided them in " gaining and
keeping possession" of this American market ? Far from it I The
more that railroad stocks went down, as a consequence of failure
of the domestic commerce, the more determined did the British
masters of our American stockholders show themselves, Shylock-
like, determined to exact "the pound of flesh." In this unhappy
period the shipping price of bars was $48, and that of railroad iron
$42,^ the average having been forty-four dollars, or nearly fifty
per cent, advance on the prices accepted in 1849, when our foreign
lords and masters had been engaged in " overwhelming all foreign
competition in times of great depression ^"^^ and thus " clearing the
way for the whole trade to step in when prices revived^ and to
carry on a great business before foreign capital could again accu-
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mulate so as to be able to establish a competition in prices with
any chance of success.''^
Twice thus, at intervals of eight years each, have we had low
British prices and great American prosperity as a -consequence of
the adoption of a policy under which American competition for the
sale of iron has largely grown. Twice, at similar interval?, have
we had high British prices and universal American depression as a
consequence of the re-adoption of that system under which we have
been compelled to compete in a foreign market for the purchase of
British iron. Twice, thus, have American railroad managers been
'' brayed'^ in the British free trade '' mortar,^' and twice have Ame-
rican transporters found prosperity by aid of those protective
measures to which they have always shown themselves so much
opposed. Their British free trade experience had been a somewhat
sad one. Have they profited of it ? Let us see.
Another eight year period has now passed by, and we reach the
present year 1865, with railroad stocks selling for a thousand mil-
lions of dollars that would not, at its commencement, have sold for
five hundred millions. What has caused this wonderful change ?
The re-creation, by means of a protective tariff, of a great internal
commerce, and nothing else. Under that tariff mines have been
opened, mills and furnaces»have been built, demand has been created
for labor and labor^s products, commerce has grown, and road
proprietors have participated with farmers in the advantages re-
sulting from the creation of a great domestic market which are so
well described in an extract from the recent message of Governor
Yates, of Illinois, already given, but here reproduced because of its
important bearing on the question now before us : —
''As a State, notwithstanding the war, we have prospered beyond
all former precedents. Notwithstanding nearly two hundred thou-
sand of the most athletic and vigorous of our population have been
withdrawn from the field of production, the area of land now under
cultivation is greater than at any former period, and the census of
1§65 will exhibit an astonishing increase in every department of
material industry and advancement ; in a great increase of agricul-
tural, manufacturing, and mechanical wealth ; in new and improved
modes for production of every kind ; in the substitution of machinery
for the manual labor withdrawn by the w^ar ; in the triumphs of in-
vention ; in the wonderful increase of railroad enterprise ; in the
universal activity of business, in all its branches; in the rapid growth
of our cities and villages ; in the bountiful harvests, and in an un-
exampled material prosperity, prevailing on every hand ; while, at
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the same time, the educational institutions of the people have in no
way declined. Our colleges and schools, of every class and grade,
are in the most flourishing condition ; our benevolent institutions,
State and private, are kept up and maintained ; and, in a word, our
prosperity is as complete and ample as though no tread of armies
or beat of drum had been heard in all our borders."
The picture here given is that of every loyal State of the Union,
and yet it is but the beginning of the change that is to be accom-
plished by means of the establishment of perfect commercial inde-
pendence. Railroad proprietors have already profited of it to the
extent of hundreds of millions of dollars, and they have yet to
profit to the extent of many other hundreds of millions by the
further opening of mines, the further building of mills, and the
further development of the wonderful amount of mineral wealth
placed by a kind Providence at our command, and waiting only the
application of that power which now lies hidden beneath the soil
of so many thousands of square miles of all these central States.
So having profited in the past, and having in view so large a profit
in the future, it might be supposed that they would now, at least, be
content. Are they so ? Are they disposed to let well alone I Has
their ''foolishness'^ at length departed from them ? Having been
now so repeatedly ''brayed" in the freg trade " mortar," are they
now at last awakened to a sense of the advantages that must in-
evitably result to themselves from carrying up our production of iron
from hundreds of thousands to millions of tons ? Do they see that,
to enable the Union to hold together, we must establish such an in-
ternal commerce as will permit of exchanges being made between
its various parts freed from the intervention of British agents
British ships, and British ports ? Are their eyes yet open to a per-
ception of the fact that the country that makes the most iron is
the one into whose hands must fall the direction of the commerce
of the world? Have they, in any manner, profited by the sad ex-
perience of the past ? To all these questions the reply must, i^n-
happily, be a negative one. Like the Bourbons, they have learned
nothing, and have forgotten none of their free trade prejudices, and
it is much to be feared they never will, or can, do so. Despite all
the lessons of the past they have now allied themselves with British
agents for crushing out those great fundamental industries to which
alone we can look for that success in the war in which we are now
engaged without which railroad stocks and bonds, Government
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bonds, and property of all descriptions must lose two-thirds of their
present value.
The men most active in the work of destruction are, strangely
enough, precisely those whose real and permanent interests should
lead them in the opposite direction— the representatives of trans-
Mississippi roads. Of all our people they are those who should
most desire to promote immigration, and yet they close their eyes
to the fact that immigration grows with development of our mineral
resources and declines as furnaces are blown out and rolling mills
are closed. Of all, they should most desire that existing railroad
property should be productive, yet do they close their eyes to the
fact that such property has always declined in value as furnaces and
mills were closed, an^ grown again as mills were once again opened,
and as furnaces were built. Of all, they should most desire that a
low price of foreign iron should operate as a check upon our iron-
masters, yet do they close their eyes to the fact that such iron has
always fallen in price as domestic competition has grown, and risen
again as soon as they and others like them had succeeded in
enabling the '' wealthy English capitalists" to destroy that compe-
tition. Of all, they are those who have suffered most and learned
the least.
It was under the protective tariff of 1828 that immigration first
became a matter of much importance. Furnaces were then built,
internal commerce grew rapidly, farmers became rich, transporters
were well rewarded for their services, immigration trebled in its
amount, and American competition compelled the British iron-
masters to furnish iron at a moderate price.
Eight years later all this was changed, the American makers of
roads and of iron being both together ruined, labor being every-
where in excess of the demand, and immigration remaining sta-
tionary at a point but little higher than it had so promptly reached
in 1834.
Eight years still later we find that under protection the produc-
tion of iron had trebled, thereby making such demand for labor as
to have carried the number of immigrants up to little short of
300,000.
At the close of another period of similar length, passed under
the free trade system, we find labor to have been in excess of demand
while railroad owners were being ruined, and immigration to have
so far declined as to have ceased to merit much consideration.
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Again, in 1865, we have reached a period of some protection to
the greatest of all the industries of the world. Labor is, therefore,
in demand. Immigration grows, and with it the value of railroad
stock, while British iron is very cheap.
The close connection that here is shown to exist between immi-
gration and protection, as well as between prosperity and a low
price of British iron, ought surely to be sufficient to satisfy our
trans-Mississippi friends of the absolute necessity that exists for
giving to the great departments of industry that certain protection
which is required for securing a rapid increase in the domestic com-
petition for supplying the market with coal, paper, leather, and iron
of all descriptions. They have land in abundance, and their mineral
wealth is great beyond all calculation. What they need is power.
To obtain that they must have men to mine their coal and their ore,
to build engines, to clear their lands, and to make their roads. Men
come always when we have protection. They fly from us always
when we are subjected to the British free trade system. Can they
not, then, see that all their real and permanent interests are in per-
fect harmony with those of the older States ? Must they be once
more ^' brayed'^ in the free trade ^'mortar" before they will come
to understand these things ?
So much for the past, and now, for a moment, let us look to the
future. To all appearances it will be needed, within a very brief
period, to relay all the southern roads, and there will be need for
hundreds of thousands of tons of rails. Are we preparing for this ?
Are we now building furnaces and rolling mills ? We are not I On
the contrary, they are being closed, even the present taxes, as com-
pared with the duties on that made abroad, being so oppressive that
the work of manufacture can no longer be carried on with any
profit. It is seen, too, that the nearer we approach a gold value
the heavier become the internal taxes, and the more does the foreign
manufacturer tend to become protected against the domestic one.
Let this continue but a little longer, and let occasion arise for laying
those Southern roads, and what then will be the price of British
iron ? Cannot our railroad managers see that, in pursuing their
present course, they are not only '^ killing the goose that lays the
golden Qgg,'''^ but also providing for subjecting themselves to a taxa-
tion for the benefit of our British friends that, combined with the
loss of the domestic traffic, must cause the price of their stock to
fall again to the low price at which it stood in 1851 ? Cannot
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they see that now, as always heretofore, they are playing cards that
have been placed in their hands by men whose one great object in
life is that of having food and labor cheap while iron is maintained
at the highest price ? Can they not see that the objects they should
always have in view are directly the reverse of this, their prosperity
coming always with rise in the profits of the farmer and in the
wages of the laborer, and decline in the price of iron ? They are
now laboring to arrest the growing tendency to emigration from
the shores of Europe ; and yet, every man who can be attracted here
becomes, from the moment of his arrival, a contributor to their
revenues, while preparing, by means of procreation, for a further in-
crease in the number of such contributors, and in the powers of each
and all.
It is surely time that our railroad managers should awaken to
the fact that their interests are so perfectly in harmony with those
of the men who mine coal and make iron that every blow levelled
at the latter tells directly upon themselves. When they shall do
so — when they shall have arrived at the conclusion that these two
great interests should stand shoulder to shoulder with each other,
and that an enlightened self-interest ought to prompt them to aid
in securing the adoption of measures looking to the incorporation
of home-grown food in every yard of cloth, every ream of paper,
and every hide of leather consumed on this side of the Atlantic — we
shall then at length be fairly on the road towa^rd finding how it is
that we may outdo England without fighting her.
Sincerely hoping that the day may not be far distant when all
this sh^^ll be done, and when our people shall, to use the words of
Jackson, become a little more Americanized, I remain, my dear
sir, with great regard and respect,
Yours very truly,
HENRY C. CAREY.
Hon. Schuyler Colfax.
Philadelphia, February 10, 1865.
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THE CURRENCY QUESTION.
LETTER TWELFTH.
Dear Sir : —
Side by side with the question of protection, and equal with
it in its importance, stands that of the Currency, to which I pro-
pose now to ask your attention.
Had it been possible, on the 4th of March, 1861, to take a
bird's-eye view of the whole Union, the phenomena presenting
themselves for examination would have been as follows : —
Millions of men and women would have been seen who were
wholly or partially unemployed, because of inability to find persons
able and willing to pay for service.
Hundreds of thousands of workmen, farmers, and shopkeepers
would have been seen holding articles of various kinds for which
no purchasers could be found.
Tens of thousands of country traders would have been seen por-
ing over their books seeking, but vainly seeking, to discover in
what direction they might look for obtaining the means with which
to discharge their city debts.
Thousands of city traders would have been seen endeavoring to
discover how they might obtain the means with which to pay their
notes.
Thousands of mills, factories, furnaces, and workshops large and
small, would have been seen standing idle while surrounded by
persons who desired to be employed ; and
Tens of thousands of bank, factory, and railroad proprietors
would have been seen despairing of obtaining dividends by means
of which they might be enabled to go to market.
Higli above all these would have been seen a National Treasury
wholly empty, and to all appearance little. likely ever again to be
filled.
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Why was all this ? The laborer needing food, and the farmer
clothing, why did they not exchange ? Because of the absence
of power on the part of the former to give to the latter anything
with which he could purchase either hats or coats.
The village shopkeeper desired to pay his city debts. Why did
he not ? because the neighboring mill was standing idle while men
and women, indebted to htei, were wholly unemployed.
The city trader could not meet his notes, because his village
correspondents could not comply with their engagements. The
doctor could not collect his bills. The landlord could not collect
his rents; and all, from laborer to landlord, found themselves com-
pelled to refrain from the purchase of those commodities to whose
consumption the National Treasury had been used to look for the
supplies upon which it thus far had depended.
With all, the difficulty resulted from the one great fact already
indicated in regard to the laborer. If he could have found any
one willing to give him something that the farmer would accept
from him in exchange for food — that the farmer could then pass
to his neighbor shopkeeper in exchange for cloth— that that
neighbor could then pass to the city trader in satisfaction of his
debt — and that this latter could then pass to the bank, to his
counsel, his physician, or his landlord — the societary circulation
would at once have been re-established and the public health re-
stored.
That one thing, however, was scarcely anywhere to be found.
Its generic name was money, but the various species were known
as gold, silver, copper, and circulating notes. Some few persons
possessed them in larger or smaller quantities; but, the total
amount being very small when compared with that which was re-
quired, their owners would not part with the use of them except
on terms so onerous as to be ruinous to the borrowers. As a
consequence of this, the city trader paid ten, twelve, and fifteen
per cent, per annum for the use of what be needed, charging
twice that, to the village shopkeeper, in the prices of his goods.
The latter, of course, found it necessary to do the same by his
neighbors, charging nearly cent, per cent. ; and thus was the whole
burthen resulting from deficiency in the supply of a medium of ex-
change thrown upon the class which least could bear it, the work-
ing people of the country— farmers, mechanics, and laborers. As
a consequence of this they shrunk in their proportions as the
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societary circulation became more and more impeded, while with
those who held in their hands the regulation of the money supply
the effect exhibited itself in the erection of those great palaces
which now stand almost side by side with tenement houses whose
occupants, men, women, and children, count by hundreds. The
rich thus grew richer as the poor gr^w poorer.
Why was all this ? Why did they nbt use the gold of which
California had already sent us so many hundreds of millions?
Because we had most carefully followed in the train of British
free trade teachers who had assured our people that the safe, true,
and certain road towards wealth and power was to be' found in the
direction of sending wheat, flour, corn, pork, and w^ool to England
in their rudest form, and then buying them back again, at quadruple
prices, paying the difference in the products of Californian mines I
Because we had in this manner, for a long period of years, been
selling whole skins for sixpence and buying back tails for a shilling:!
Because we had thus compelled our people to remain idle while
consuming food and clothing, the gold meanwhile being sent to
purchase other food and clothing for the workmen of London and
Paris, Lyons, Manchester, and Birmingham I
Why, however, when circulating notes could so easily be made,
did not the banks supply them, when all around them would so
gladly have allowed interest for their use ? Because those notes
were redeemable in a commodity of which, although California
gave us much, we could no longer retain even the slightest portion,
the quantity required abroad for payment of heavy interest, and
for the purchase of foreign food in the forms of cloth and iron,
having now become fully equal to the annual supply, and being at
times even in excess of it. That demand, too, was liable at any
moment to be increased by the sale in our markets of certificates
of debt then held abroad to the extent of hundreds of millions,
the proceeds being claimed in gold, and thus causing ruin to the
banks. To be out of debt is to be out of danger, but to be in
debt abroad to the extent of hundreds of millions is to be always
in danger of both public and private bankruptcy. The control of
our whole domestic commerce was therefore entirely in the hands of
foreigners who were from hour to hour becoming richer by means of
compelling us to remain so dependent upon them that they could
always fix the prices at which they would buy the skins, and those
at which they would be willing to sell the tails. As a necessary con-
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sequence of this, the nation was not only paralyzed, but in danger
of almost immediate death.
Such having been the state of things on the day of Mr. Lincoln's
inauguratioir, let us now look at the remedy that was then required.
Let us, for a moment, suppose the existence of an individual with
wealth so great that all who knew him might have entire confi-
dence in the performance e>f what he promised. Let us then sup-
pose that he should have said to the laborers of the country, '* Go
into the mills, and I will see that your wages are paid ;" to the
millers, '' Employ these people, and I will see that your cloth is
sold;" to the farmers, ''Give your food to the laborer and your
wool t(f the millers, and I will see that your bills are at once dis-
charged;" to the shopkeepers, "Give your coffee and your sugar to
the farmer, and I will see that payment shall forthwith be made ;"
to the city traders, " Fill the orders of the village shopkeeper and
send your bills to me for payment ;" to the landlords, " Lease your
houses and look to me for the rents ;" to all, " I have opened a
clearing house for the whole country, and have done so with a view
to enable every man to find on the instant a cash demand for his
labor and its products, and my whole fortune has been pledged for
the performance of my engagements ;" and then let us examine
into the effects. At once the societary circulation would have been
restored. Labor would have come into demand, thus doubling at
once the productive power of the country. Food would have been
demanded, and the farmer would have been enabled to improve his
machinery of cultivation. Cloth would have been sold, and the
spinner would have added to the number of his spindles. Coal
and iron would have found increased demand, and mines and
furnaces would have grown in numbers and in size. Houses be-
coming more productive, new ones would have been built. The
paralysis would have passed away, life, activity, and energy having
taken its place, all these wonderful effects having resulted from
the simple pledge of the one sufficient man that he would see the
contracts carried out. He had pledged his credit and nothing
more.
What is here supposed 4o have been done is almost precisely
what has been done by Mr. Lincoln and his Administration, the
only difference being, that while in the one case the farmers and
laborers had been required to report themselves to the single indi-
vidual or his agents, the Government has, by the actual purchase
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of labor and its products, and the grant of its pledges in a variety
of shapes and forms, enabled each and every man in the country
to arrange his business in the manner that to himself has seemed
most advantageous. To the laborer it has said, We need your
services, and in return will give you that which will enable your
family to purchase food and clothing. To the farmer it has said,
We need food, and will give you that by means of which you can
pay the shopkeeper. To the manufacturer it has said, We need
cloth, and will give you that which will enable you to settle with
the workman and the farmer. To the naval constructor it has said,
We need your ships, ^nd will give you that which will enable you
to purchase timber, iron, and engines. In this manner it*is that
domestic commerce has been stimulated into life, the result exhibit-
ing itself in the facts, that while we have in the last three years
increased to an extent never known before the number of our
houses and ships, our mills, mines, and furnaces, our supplies of
food, cloth, and iron ; and while we have diversified our industry
to an extent that is absolutely marvellous ; we have been enabled
to lend, or pay, to the Government thousands of millions of dollars,
where before, under the system which made us wholly dependent on
the mercy of the **most wealthy capitalists'' of England, we found
it difficult to furnish even tens of millions. The whole history of
the world presents no case of a financial success so perfect.
In the physical body health is always the accompaniment of
rapid circulation, disease that of a languid one. Now, for the
first time since the settlement of these colonies, have we had expe-
rience of the. first. Every man who has desired to work, has found
a purchaser for his labor. Every man who has had labor's pro-
ducts to sell, has found a ready market. Every man who has had
a house to rent, has found a tenant. And why ? Because the
Government had done for the whole nation what Companies do for
localities when they give them railroads in place of wagon roads.
It had so facilitated exchange between consumers and producers,
that both parties had been enabled to pay on the instant for all
they had had need to purchase.
Important, however, as is all this, it Js but a part of the great
work that has been accomplished. With every stage of progress
there has been a diminution in the general rate of interest, with
constant tendency towards equality in the rate paid by the farmers
of the East and the West, by the owner of the little workshop
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and by him who owns the gigantic mill. For the first time in our
history the real workingmen — the laborer, the mechanic, and the
little village shopkeeper — have been enabled to command the use
of the machinery of circulation at a moderate rate of interest.
For the first time have nearly all been enabled to make their pur-
chases cash in hand, and to select from among all the dealers those
who would supply them cheapest. For the first time has this class
known anything approaching to real independence ; and therefore
has it been that, notwithstanding the demands of the war, capital
has so rapidly accumulated. The gain to the working people of
the Union thus effected, has been more than the whole money cost
of the war, and therefore has it been that all have beei> able to
pay taxes, while so many have been enabled to purchase the
securities offered by the Government.
Further than all this, we have for the first time acquired some-
thing approaching to a national independence. In all time past,
the price of money having been wholly dependent on the price in
England, the most important intelligence from beyond the Atlantic
was that which was to be found in the price of British securities
on the Exchange of London. With each arrival, therefore, we
were, to our great enlightenment, and that too by means of flaming
capitals, informed that Consols had risen or had fallen, our railroad
shares then going up or down because the Bank of England had
seen fit to purchase a few Exchequer bills, or had found it neces-
sary to part with some of those it previously had held. In all
this there has been a change so complete that the price of British
Consols has ceased entirely to enter into American calculations.
The stride, in this respect alone, that has been made in the direc-
tion of independence, is worth to the country more than the whole
money cost of the great war in which we are now engaged.
The time had come to make it, the course of Britain having
recently been in a direction that limits the circulation and insures
a rise in the rate of interest. The Bank of England is limited to
£14,000,000 as the amount of notes that may be issued in excess
of the gold actually in its vaults. All other banks being limited
to the amount that existed on a certain day in 1844, and some of
them having since that time gone out of existence, the result
exhibits itself in the fact that the total machinery of circulation
supplied by the banks is less now than it was twenty years since.
As a consequence of this, and in despite of the extraordinary
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influx of gald from California and Australia, the rate of interest
charged for the use of such machinery has been for some years
past higher than that paid in any of our Atlantic cities, the fluc-
tuations in regard to paper of the highest character having been
between six and ten per cent. By the last accounts it had fallen
to 5 J, and that is now, as English journalists advise us, as much
to be regarded as the normal price of money as was 4 per cent,
before the discovery of California mines. The danger of depend-
ence upon the British money market, always great, has now been
much increased • and it must become greater with every year, so
long as British banking operations shall continue to be governed
by that'wonderfully absurd system for which the British people
stand to-day indebted to the financial ignorance of Sir Robert Peel.
Great and obvious as have been the benefits derived by the
country from the system inaugurated under the administration of
Mr. Lincoln, they are, as we are assured, counterbalanced by their
tendency to produce inflation, and thus to increase the price of
gold. How little truth there is in this, I propose to show in
another letter, and meanwhile remain, my dear sir,
Yery truly and respectfully yours,
HENRY C. CAREY.
Hon. Schuyler Colfax.
Philadelphia, Feb. 13, 1865.
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THE CUERENCY QUESTION.
a
LBTTEE THIETEENTH.
Dear Sir: —
That the currency has been, and is, inflated, is beyond
question. Whence, however, has come the inflation ? What has
caused the existence of disease ? Such are the questions to which
an answer must be obtained before we undertake to prescribe the
remedy to be adopted. Failing to do this, we shall certainly kill
the patient.
By all the currency doctors, both here and abroad, the cause of
financial crises is found in the circulation ; and hence it has been
that both here and elsewhere the world has been furnished with so
many laws in regard to it, none of which wduid ever have existed
had the matter been properly understood. To that question it
was that Sir Robert Peel addressed himself when he framed a law
that bas already twice broken down, and that must continue to
break down on each successive recurrence of the state of things it
was intended to prevent. The statute-books of nearly all of our
States present to view similar laws, all of which have proved as
utterly worthless, and some of them almost as injurious, as that
British one above referred to.
The circulation needs no regulation, and foT the simple reason
that the people regulate it for themselves. For proof of this,
look, 1 pray you, to the fact that the 'Treasury has been for
several years past engaged in trying to obtain for small notes a
circulation amounting to fifty millions; and yet has not, at this
hour, one of even the half of that amount. Why has it notT>
Because the people need no more than twenty or twenty-fi^e mil-
lions. If they did need more, they would gladly take it. When
Congress had before it a bill authorizing the emission of that
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description of currency, it would have been deemed rank heresy
to say that no limitation was needed, yet has experience proved
that such was certainly the case. Had they omitted all restriction
on the /' greenbacks," they might perhaps have found, as in the
case of the smaller notes, that the people understood better what
they needed than did their legislators. That they would have done
so, I regard as beyond a question.
It is constantly assumed that it is the banks that determine how
many notes shall be in use, and yet the experience of each and
every individual in the community proves that exactly the reverse
of this is true. That you, my dear sir, may satisfy yourself of
this, I pray you to look for a moment to your own constant action
in regard to the question now before us. On a given day you
receive a quantity of bank-notes, which are then in circulation.
What do you then do with them ? You place them in a bank,
and thus put them out of circulation. On the following day you
perhaps take them from the bank and pay them out, thus putting
them again in circulation. What control did the bank exercise
over these several operations ? None whatsoever. It is you, your
friends, neighbors, and fellow-citizens generally, that regulate the
circulation, and it is just as wise to pass laws limiting its amount
as it would be to pass other laws determining the quantity of coal,
iron, sugar, or coffee to be provided for their use.
To this it is due that in communities that are really independent
the circulation is so very nearly a constant quantity. That of the
Bank of England, in the eventful period from 1832 to 1841,
averaged £18,000,000, and although it embraced the time of one
of the greatest excitements and one of the most fearful reverses
ever known in that country, the circulation never went beyond
that average to the extent of five per cent.^ nor fell below it to
that of eight per cent. The differences exhibited are less even
than might be reasonably looked for by any one familiar with the
fact that daring several of the years every workingman had been
fully employed, while in several others a large portion of the
manufacturing population was either idle or but half employed.
Take now the following figures representing, in millions, the
circulation of the New York banks, and see how uniform was its
amount until the withdrawal in 185T, by the banks, of many mil-
lions of loans that had been based upon deposits, had almost anni-
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1862 . .
. 42
1863 . .
, . 42
1864 . .
, . 40
135
hilated the commerce of the country, and thus deprived our people
of the power to make use of notes.
1855 ... 41 1859 ... 36
1856 ... 41 1860 . . . 38
1057 ... 41 1861 ... 36
1858 . . • . 35
In every case, as here presented, reduction had been a conse-
quence of stoppage of the societary circulation, and not a cause
of it.
We are told, however, of the depreciation of Continental money,
French assignats, and Confederate notes, and are threatened that
we shall here experience the same result; but those who present
such views can scarcely properly appreciate the difference between
the conditions under which such paper was emitted and those in
which we stand. The first was issued by a Confederation that was
little better than a rope of sand, and that had no certain power to
provide for the ultimate payment of either principal or interest of
any debt it might contract. The second were at firgt receivable
only in payment for confiscated property, and were of no value for
any other purpose. As the country became more and more "a
scene of rude commotion," and as employment for the people
passed away, their quantity was more and more increased, and
they then were made a legal tender, but there existed then no or-
ganized government capable of giving protection to either property
or life— none capable of making secure provision for any ultimate
assumption of payment by the State. The last has been issued by
an authority the permanent maintenance of which has been so much
doubted that few have held its securities longer than was required
for enabling them to pass them off to some one else. They have
been received by a community that has been cut off from the outer
world, and whose single source of wealth has wholly disappeared.
They are now used by one whose numbers are constantly diminish-
ing, and over a surface that is becoming daily more and more cir-
cumscribed. When the notes were few in number the Southern
people were still rich, and, with the exception of Maryland, the
notes circulated in every State south of Mason and Dixon's Line,
the Ohio and the Missouri. Now, when they so much abound, the
rich have become poor, the poor have become poorer, rich and
poor to a great extent have passed out of existence, and the thea-
tre of circulation has become limited to portions of half a dozen
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States. No one desires to convert Confederate paper into a
permanent security, it being clearly obvious that of security for=
future payment there can be none. The notes will .still at some
price help to pay for a negro or a horse, but the bonds will not do
so at any price whatsoever.
Contrast here, my dear sir, the circumstances above described
with those under which our ^^ greenbacks" have been issued. They
have gone out in payment for property purchased of, or services
rendered by, persons who have freely sold the one or rendered the
other. The authority by which they have been issued is one quite
as capable of binding posterity as was the Government of Wash-
ington and Adams. They are used by a people whose numbers
are constantly growing, and whose productive powers are steadily
increasing in the ratio which they bear to population. The man
who receives them finds himself surrounded by other men who
gladly give him houses and lands at prices little greater than those
he would have paid ten years since, and before the great free trade
crisis of 1851. In all this the Government co-operates by author-
izing him to deposit with its officers, for periods long or short, any
amount for which he may not have present use, receiving in return
certificates by means of which he can withdraw the amount on
giving certain notice; or at his pleasure receive bonds payable in
three, four, ten, twenty, or forty years, receiving interest in gold
or paper, according to the terms agreed upon ; and here we
have a security against depreciation the like of which the world
had never seen before. It is a safety valve such as could not
have been provided by any of the authorities to which the world
has been indebted for those chapters of financial history which
are connected with the Continental paper, the Assignat, or the
Confederate notes.
Having thus shown what had been the circumstances under
which the ''greenbacks" have been offered for acceptance by the
world, I propose now to show what is the extent to which they
have been issued, and what have been the gold phenomena by
which that issue has been attended.
The first batch of notes amounted to $60,000,000, and were
issued under laws passed in July and August, 1861. Nearly the
whole of these have since been withdrawn and cancelled.
The second emission was under a law of February, and the third
under one of July, 1862, giving us at the close of that year a total
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Government circulation of little less than $300,000,000. The price
of gold as yet had changed but slightly. In June, 1862, it still
stood at 104. In July and August it fluctuated between 109 and
119. In October it rose to 124, and for the rest of the year it
varied between 130 and 137. Compared with what we since have
seen, the advance thus far seems as very trifling; and yet the
amount of legal tender notes then existing bore a very much larger
proportion to the number of persons to whom a currency was to
be supplied — to the business that was to be transacted — and to
the surface that was to be covered than is at this moment borne
by the notes now in circulation. Such being the case, as I pro-
pose to show it is, we must certainly look elsewhere for the cause
of the present price of gold.
In February, 1863, that price rose to 171. Why was this?
Not certainly because of any increase in the "greenback" circu-
lation, the further emission of these having been accompanied by
the withdrawal of the original $60,000,000 of treasury potes of
which but $3,351,000 remained out in the following June. The
amount of circulation must, therefore, have been but little more
at this time, when gold was at 171, than it had been in the pre-
vious autumn when its price ranged between 115 and 124.
In the following month a further issue to the extent of
$150,000,000 was authorized, and, according to the generally re-
ceived theory, gold should now have risen. Did it so ? On the
contrary it fell, and in July, although the greenbacks then out-
standing amounted to $400,000,000, was as low as 124. As it
seems to me, we cannot in this direction find the cause of changes
such as these.
In September the greenbacks issued had risen to $415,000,000,
and the price of gold to 143. The two, however, could have had
no necessary connection with each other, gold being now much
lower than it had been in the previous February, while the circu-
lation was higher by little less than $100,000,000.
By the act of March, 1863, the Secretary had been empowered
to issue interest-bearing notes, legal tender for their face, to the
extent of $400,000,000. Of this power no use appears to have
been made prior to the first of October of that year. In that and
the following month there were issued of greenback^ $15,000,000,
and of interest-bearing legal lenders $35,000,000; and it is fair
to assume a further issue for December of $30,000,000, bringing
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up the total amount to nearly $500,000,000. What was the effect
of this upon gold ? Did it carry it up to, or beyond, the price at
which it had stood in the previous February ? On the contrary,
although in the meantime $200,000,000 had been added to the
legal tenders issued, it remained 20 per cent, lower, the price on
the first of January being only 151. How the opponents of what
is called ** the paper money system " can reconcile these facts, I do
not clearly see.
Since then the price has been nearly as follows : —
January ... 157 May 192 September . . 220
February ... 159 June .... 240 October ... 220
March .... 165 July .... 276 November ... 230
April .... 178 August .... 257 December ... 220
Throughout the whole of these latter months there had been the
most violent fluctuations, but these figures will, I think. Suffice to
give you, my dear sir, a general idea of the whole movement.
What, in the meantime, had been the course of the Treasury in
regard to the issue of legal tender notes? For a reply to this
question I must refer you to the following figures exhibiting the
state of that portion of the public d^bt on the first of November
last : —
I. Of greenbacks the amount then outstanding was . $433,000,000
II. Of one year notes 43,000,000
III. Of two year notes 16,000,000
IV. Of two year coupon notes 61,000,000
V. Of three year notes 102,000,000
$655,000,000
The amount is here shown to have been greater by about one
hundred and fifty millions than it had been a year before, but of
this how much was there that really remained in circulation ? At
the present moment, as 1 am assured, two-thirds of Nos. II,,
III., and IV. have been absorbed by individuals and institutions,
and have ceased to constitute any portion of the circulation. Such,
likewise, is the case with a portion of No. Y. Admitting, now,
the quantity since issued of this last to be equal to the amount of
the others so nbsorbed in the last three months, we obtain, as a
deduction from the above apparent circulation, the large sum of
$80,000,000, and thus reduce the real amount to $575,000,000.
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Is this, however, all the deduction needed to be made ? By no
means ! Throughout this period banks have been parting with
their gold, and substituting for it United States notes, both de-
mand and interest-bearing, and individuals, to a vast extent, have
followed their example. The farmer pays for what he needs in
local notes, but he puts aside his "greenbacks." The miner and
the mechanic — the laborer and the village shopkeeper — the soldier
and the sailor — the immigrant who is seeking to invest his little
capital, and the sempstress who is trying to accumulate the means
with which to purchase a sewing-machine — all of these have become
hoarders of *' greenbacks," which have thus been withdrawn from
circulation, and have, for the time being, no more influence upon
either the gold or produce markets than they would have had they
been altogether blotted out of existence. Adding now together
all these quantities, we shall, as I think, readily obtain the sum of
$75,000,000, and thus reduce the actual Ti'easury circulation to
the precise point at which it stood at the close of 1863, when the
price of gold was 151.
There is, however, another portion of the circulation which now
demands attention. At the date of which I have spoken there
were in existence 631 national banks, with an authorized capital
of $428,000,000, to which there had been issued notes amounting
to $72,000,000. To what extent those notes had then been circu-
lated we cannot tell, but we know, from the Report of the Com-
missioner of the Currency, that on the first Monday of the previous
October their actual circulation amounted to only $45,260,000, to
meet which, and to provide for payment of their depositors, they
held, in "specie and other lawful money," $44,801,000. Of the
first, the quantity held is likely to have been very small indeed, but
admitting it to have been even as much as $10,000,000, and that
another sum of equal amount had been in the form of interest-
bearing legal tenders, the quantity of " greenbacks" held by them
must have been $25,000,000. This would reduce their apparent
addition to the qj?antity of "paper money" to but $20,000,000 ;
but when we take into view the fact that in the year embraced in
the Report 168 State banks had become national institutions, and
that, to the extent of their issues, the new notes had been mere
substitutes for those previously in existence, we see that the real
addition thus made to the circulation had been a quantity too
small to be worthy of any serious attention.
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At the date of the battle of Gettysburg, say July 3, 1863, the
legal tender circulation was, as has been shown, $400,000,000,,with
gold at 124. With a present circulation of only $500,000,000,
gold is above 200 ; and yet, as I propose now to show, its amount
is very far less, in proportion to the space over which it is circu-
lated, to the population to be supplied, and to the work to be
done, than it was at the date to which I have referred.
At that time we had secure possession of scarcely any portion
of the country south of Mason and Dixon's Line, the Ohio and
the Missouri. We did, it is true, still hold Washington, but a
rebel army was then in Maryland. South of that, in the Atlantic
States, we held Fortress Monroe, Norfolk, Newbern, Hilton Head
and its immediate neighborhood. Kentucky was then exceedingly
disturbed, while Tennessee was mainly occupied by rebel armies.
Missouri was, in almost its whole extent, a *'debateable land,"
while rebel forces occupied nearly the whole of Arkansas and by far
the larger portion of Louisiana. On the Mississippi we held
Memphis at the north and New Orleans at the South. Through-
out the border and Southern States, therefore, there was little
work being done, and little use for circulation of any description
whatsoever; and of what was used nearly the whole consisted of
Confederate notes.
To-day, the Federal circulation is needed throughout Maryland,
the larger portion of old Yirginia, Kentucky, Tennessee, Missouri,
Arkansas, much of Mississippi and Louisiana, parts of Georgia,
Alabama, and North Carolina, and throughout the whole region
bordering on the Mississippi, It is needed, too, by every emi-
grant to Minnesota, Nebraska, Colorado, and Nevada ; and thus,
while we have, in the last eighteen months, added largely to the
population to be supplied, we have almost doubled| the territory
within which that population may be found.
Simultaneously with all this we have added little less than one-
half to the productive powers of our people, and to the transactions
for facilitating which a general medium of circulation is required.
Having studied these things you will, my dear sir, as I think,
be disposed to agree with me in the conclusions at which I have
arrived, as follows : —
That the circulation bears now a much smaller proportion to
the need for it than it did at the time when gold stood at 124.
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That to this is to be attributed that the '' greenback" is fre-
quently so scarce as to interfere, and that seriously, with the
operations of the Government ; and
That, if we desire to find the cause of the present hi^h price of
go]§ff it is in quite another direction we must look for it.
What that direction is I propose to show in another letter, and
meanwhile remain,
Yours, very truly,
HENRY C. CAREY.
Hon. Schuyler Colfax.
Philadelphia, February 13, 1865.
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THE (^UREENCY QUESTION.
LETTER FOURTEENTH.
Dear Sir : —
The power of a bank to make loans is derived from the use
of its capital ; from its power to furnish circulation ; and from its
further power to apply to the purchase of securities the moneys
standing to the credit of those with whom it deals, and known by
the name of deposits.
That it is not to the use of the first we are indebted for the in-
flation now complained of is very certain. That variations in
the second have been only those consequent upon changes other-
wise produced has been already shown. There remains, then, only
the third, and to that it is that I now propose to call your atten-
tion, first, however, asking you to accompany me for a moment in
an examination of the effect which necessarily results from the loan
by banks of moneys for which they themselves are indebted to others,
and which they may, at any moment, be called upon to refund.
Let us suppose you, yourself, to have received on any given day
notes, or specie, amounting to ten, fifteen, twenty, or fifty thousand
dollars, and that while waiting to re-invest them you have placed
them in your safe. Going now on change, you find that sum to
be there represented by yoxirself alone.
Let us next suppose that tnstead of so placing them you had
had them put to your aredit in a neighboring bank, and that
the bank had forthwith lent them to a dealer in money, or in stocks.
Going on change under these circumstances you find your money
twice represented ; first by yourself who have it, as you suppose, in
the bank ; and next, by the man who had borrowed it and had had it
put to his credit precisely as it had previously been placed to yours.
Here is a very simple operation by means of which the amount of
deposits has been doubled hy the action of the hank itself ; and
here it is that we find the cause of all the inflation of which we
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so often have had reason to complain, and to which, as I propose
to show, we chiefly owe the numerous and extraordinary changes
in the price of gold.
By the last report of the Superintendent of the New York banks-
the amount for which they then stood indebted to individuals,
called depositors, was nearly $250,000,000. The owners of this
vast sum might be seen passing up and down Wall Street, as fully
ready to purchase stocks or notes as they could have been had it
been in their private safes. Side by side with^ them, however,
might be seen other individuals to whom that same amount had
been lent, and who were equally ready to bid for any securities
that might be offered. The $250,000,000 of capital had thus
become $500,000,000 of currency, so to remain until the owners
might claim to be repaid. The bank then making the same de-
mand upon its debtors the $500,000,000 of currency would forth-
with shrink into its original dimensions, and become once again
but $250,000,000.
No such general demand would, of course, ever be made, and
that none such has been needed for producing the crises of the past,
or the gold excitements of the present, will be seen on an exa-
mination of the following figures, presenting, in millions, the
movements of the New York banks before and after the great
crisis of 1857 : —
June '56.
Sept. '56.
June '57.
Sept. '57.
Dec. '57.
Capital . .
. 92
96
104
107
107
Circulation .
. 31
34
32
27
24
Leaving the circulation now wholly unprovided for, we will take
the amount^of the so-called deposits, and set against these latter
the whole amount of specie with a view to ascertain what had been
the amount of currency created by the ballooning system: —
Deposits . . 103 104 109 85 83
Specie ... 14 35 14 14 29
Lent out . . 89 89 95 71 54
In the first two of these periods 89 millions of real capital had
become 178 of currency. In the third that currency had risen to
190. In the last it had, by the simple process of calling in loans,
been carried down to 108.
The facts here exhibited in regard to the circulation are —
First, that up to the moment just preceding the explosion there
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had not only been no increase, but an actual reduction in its
amount ; second, that that reduction had been consequent upon
a closing of workshops and suspension of business otherwise
produced ; and third, that, notwithstanding the almost entire sus-
pension of business, the apparent reduction was but $8,000,000.
That the real one must have been very far less than this will be
obvious to all who know how large is the amount of notes of
other banks remaining unexchanged, and for the time being out
of circulation, at a time of financial ease, compared with that which
is so retained in a period of crisis as severe as that now under exa-
mination.
Those exhibited in regard to the process of duplication to which
your attention has been called, are as follows : —
First. The very small increase that had been required for pro-
ducing the largest excitement throughout the country at large.
The total amount from June, 1856, to June, 185t, was, as here is
shown, but six millions; and yet there had been thus produced an
inflation of the value of property throughout the country to the
extent of many hundreds of millions :
Second. The very small reduction required for precipitating a
whole community into a state of absolute and entire ruin, such as
existed at the date of the last returns here given. The whole
reduction had been but forty-one millions, and yet the changes in
the value of property thereby produced counted certainly by thou-
sands of millions.
What caused the rise ? The use hy banks of the property of
others. What caused the fall? The demand of the banks for
payment by their debtors. Who suffered? Every m^n who was
in debt. Who profited? Every one who had the command of
money. The rich were thus made richer and the poor made
poorer by means of an inflation caused by 'the action of those
very bank managers who, in all times past, had largely profited of
such changes.
With all this, as has been shown, the circulation had nothing
whatsoever to do, nor could it have, for the reason that that portion
of the currency is governed by the people themselves, and not in
any manner controlled by bank directors. Nevertheless, all our
laws are framed as if the circulation were really the portion which
needed regulation.
Following out the view thus presented I give you now, in
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the following figures, the movement of the same institutions in the
^past four years: —
June June Dec. June Sept. Mar. June Sept,
'61. '62. '62. '63. '63. '64. '6L '64.
Capital .... 110 109 109 108 109 109 108 107
Circulation . . . . 26 39 39 32 33 31 32 33
In the first of these periods the circulation was small because
our people were almost wholly unemployed. This was a conse-
quence of error elsewhere, and not itself a cause of error.
Deposits and bank balances . 139 206 258 272 288 354 298 297
Specie and bank balances . 60 55 65 63 53 46 43 40
Lent out . . . . 79 151 193 209 235 308 255 257
The duplication of these vast sums, consequent upon the very
simple process of placing money to the credit of A, as a depositor
of his own property, and to that of B as a borrower of the same
money, gives the following very remarkable figures: —
158 302 386 418 470 616 510 514
Price of gold at same dates par 103 131 147 128 161 195 255
to to to to to to
109 133 142 165 245 191
The seventh column gives the precise period of the agitation
caused by the passage of the gold hill; and from that to the eighth
we have in the price of gold the efTect of the extreme depression
of the public mind of July and August last. It is by no means
to be assumed that the gold variations have been altogether caused
by the inflation above exhibited; but, that they have to nearly
their whole extent been so, the figures above most clearly prove.
Were bank loans reduced to the point at which they stood three
years since, gold would be now as cheap as it was then.
The addition to the currency that had thus been made by
the banks of the single State of New York, in comparing March,
'64, with June, '61, appears to have been precisely $229,000,000.
In all such movements the rest of the country, although at a long
distance, follows suit to New York city. Three years since,
when gold was still at par, the debts, called deposits, of the Penn-
sylvania banks, stood at $25,000,000. A year since, with gold at
165, they had already doubled; and since that time the movement
in the direction of expansion has been at a greatly accelerated
10
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pace. In the last twelve months the deposit line of the Phila-
delphia banks alone has increased $14,500,000, most of their gold
meanwhile having been converted into interest-bearing legal tender
notes. As a consequence of all this, the interest-bearing securities
held by them are little less than quadruple the amount of their
capital. The inflation of this city alone is greater than was that
of New York city prior to the great crisis of 1857.
The addition thus made to the currency of Pennsylvania, can
scarcely be estimated at less than $40,000,000. Allowing now
for all the rest of the loyal States only tv^^ice that sum, we obtain
$120,000,000, which, added to that of New York, gives us a total
of $349,000,000.
Of what does this addition consist ? Of precisely the same
material that is used for inflating all other balloons — gas, and
nothing else. The slightest pinhole causes it to disappear, and
therefore is it that we meet with changes in the dimensions of the
machine violent as are those here exhibited in figures representing,
in millions, the loans, throughout the past year, of New York city
banks : —
January
174 to 162
July .
198 to 185
February
1C3 to 174
August
185 to 188
March
182 to 199
September .
189 to 185
April .
203 to 194
October
185 to 186
May
198 to 195
November .
187 to 192
June .
196 to 197
December .
196 to 204
At one moment, as we see, gas is injected, and prices of gold,
stocks, and commodities generally throughout the country, rise —
and then the initiated sell. At another, it is compelled to escape,
prices then falling, to the great advantage of those who had so
lately sold. Such is the movement that is allowed to remain un-
regulated, the aid of Congress being meanwhile invoked in favor
of establishing control over a circulation already regulated by
means of that "higher law" which subjects to the popular will that
portion of the financial movement.
Most widely different from all this is the action of that portion
of the currency furnished by the Treasury, and known by the
popular name of "greenbacks." In the one case, the addition
represents nothing but the will of certain persons whose inte-
rests are to be promoted by expansion, to be followed, on the
succeeding day probably, by contraction. In the other, it repre-
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sents property delivered or service rendered to the Government.
In the one, it is local, and the effect upon prices is great in
proportion to the limitation of the space. In the other, it is paid
ont to the soldier, wherever found, whether in the hospitals of
New England, the camps of the Centre, or the armies of the South
and Southwest. It goes into the pocket of each individual, there
to remain until he can find an opportunity to send it home, or in
some other manner to use it for his private benefit. It goes
into the pockets of farmers, miners, mechanics, laborers, sailors,
traders large and small, enabling each and every one to buy for
cash, and cheaply, what before he could obtain only at the single
shop at which he could have credit. It helps to build ships on
the Atlantic and the Pacific, on the lakes, and on the Mississippi;
and it pays the men who sail or work those ships. It enters into
every home of the Union, and into every old stocking by help of
which the sewing-woman is preparing for the purchase of a ma-
chine, or the laborer for that of a house. The field of its
operation is coextensive with the Union, and its power to affect
injuriously the prices of gold, labor, or commodities generally, is
in the mverse ratio of the extent of that field. Nevertheless, to
prevent the possibility of injury from that source, the Treasury has
created an acceptable investment, coextensive with the ''green-
backs" in amount, by means of which every holder is enabled
to convert into an interest-bearing security whatsoever surplus
may be in his hands. Having thus provided a perfect escape-valve^
neither the captain nor the crew need fear explosion.
The banker, on the contrary, desires that there may be no valve
whatsoever but that which he himself controls. When it suits
him, he injects the gas, and continues so to do until he has arrived
as near as he dares to go to the point at which explosion may be
looked for. Next he withdraws the gas with equal rapidity, and
thus produces crises like that of 1857, the following brief account
of which, taken from Gibbons's Banks of New York, may now,
my dear sir, have some interest for you : —
"The most sagacious of our city bank officers saw no indications
of an unusual storm in the commercial skies. When the loans
reached the unprecedented height of one hundred and twenty-two
millions of dollars, on the eighth of August, they pointed to the
annual reduction of ten or twelve millions in the autumn months,
as one of the regular ebbs to which the market is subject; but
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they had no foresight of extraordinary pressure, and no dreams of
panic. Credit was extended, but Hhe country never was so rich.^
" The banks began to contract their loans about the eighth of
August. Securities immediately fell in price at the Stock Board.
The failure of a heavy produce house was explained by the de-
pression of that particular interest in the market. A report of
dishonest jobbing, and of the misuse of funds in a leading railway
company, caused partial excitement, without seriously disturbing
confidence in mercantile credit.
*'0n the twenty-fourth of August, the suspension of the Ohio
Life Insurance and Trust Company was announced. It struck on
the public mind like a cannon shot. An intense excitement w^as
manifested in all financial circles, in which bank officers partici-
pated with unusual sensitiveness and want of self-possession. Fly-
ing rumors were exaggerated at every corner. The holders of
stock and of commercial paper hurried to the broker, and were
eager to make what a week before they would have shunned as a
ruinous sacrifice.
** Several stock and money dealers failed, and the daily meetings
of the Board of Brokers were characterized by intense excitement.
*^ Every individual misfortune was announced on the news bul-
letins in large letters, and attracted a curious crowd,. which was
constantly fed from the passing throng.
*' The Clearing House report for the twenty-ninth of August —
the first after the suspension of the Ohio Life Insurance and Trust
Company — showed a reduction of fpur millions of dollars in the
bank loans during the previous week.
*' The most substantial securities of the market fell rapidly in
price at public sale.
^* The safety of bank-notes in circulation was suspected or denied.
The publishers of counterfeit detectors spread alarm among the
shopkeepers and laborers, by selling handbills with lists of broken
banks, which were cried about the streets by boys, at * a penny
a-piece.'
**One of the Associated Banks fell into default at the end of
August, and a fraud of seventy thousand dollars by the paying
teller roused suspicion of similar misconduct in other institutions.
"The regular discount of bills by the banks had mostly been
suspended, and the street rates for money, even on unquestionable
securities, rose to three, four, and five per cent, a month. On the
ordinary securities of merchants, such as promissory notes and bills
of exchange, money was not to be had at any rate. House after
house of high commercial repute succumbed to the panic, and
several heavy banking firms were added to the list of failures.
" The settlements of the Clearing House were watched with the
expectation of new defaults ; and their successful accoihplishment,
each day, was a subject of mutual congratulation among bank
ofiBcers.
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*' The statement of the city banks for the week ending Septem-
ber 5th showed a farther reduction in the loans of more than four
millions of dollars.
'* Commercial embarrassments and suspension became the chief
staple of news in all the papers of town and country. The pur-
chase and transportation of produce almost entirely ceased.
" From this period, there was nothing wanting to aggravate the
common distress for money. The failure of the Bank of Pennsyl-
vania, in Philadelphia, was followed by that of the other banks of
that city, and by those of Baltimore, and of the Southern Atlantic
States generally. Commercial business was everywhere suspended.
The avalanche of discredit swept down merchants, bankers, moneyed
corporations, and manufacturing companies, without distinction.
Old houses, of accumulated capital, which had withstood the vio-
lence of all former panics, were prostrated in a day, and when they
believed themselves to be perfectly safe against misfortune.
" The bank suspension of New York and New England, in the
middle of October, was the climax of this commercial hurricane.
" Such is the outline of the most extraordinary, violent, and de-
structive financial panic ever experienced in this country. What
caused it ? To what source or sources can it be traced? Where
lies the responsibility of it ? What lessons does it teach ? What
preventives are indicated against the recurrence of similar disas-
ter? These are questions which agitate the public mind, and which
ought to be answered, if possible, for our instruction and future
guidance."
Seeking an answer to these questions, the author furnishes a
full statement of the movement, its result being that of showing,
as he says, '' beyond cavil, that the hanks, not the depositors, took
the lead in forcing liquidation. In the twenty days prior to the
26th of September," as he adds, ''the deposits fell off but $341,746,
while the resources of the banks were increased $6,694,179."
The men who had taken ''the lead" in measures which had
prepared for the explosion proved now to be those most active in
" forcing liquidation," and thus enabling themselves to purchase,
at low prices, stocks, bonds, and real estate which they had sold
at high ones. Aided by the large fortunes thus acquired men of
the same stamp are this day exercising a power thrice greater than
was then exhibited, the tendency of all their measures being in the
direction of making the poor poorer and the rich richer than ever
before ; those of the Treasury, meanwhile, looking in a precisely
opposite direction, and tending to lower the rate of interest, while
increasing the power over his own actions exercised by the laborer,
the miner, the mechanic, and the farmer.
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The ''greenback" has fallen on the country as the dew falls,
bringing with it good to all and doing injury to none. The gas-
formed currency, on the contrary, is in the financial world what
the water-spout is in the natural one. Whirled about by the wind,
and wholly uncertain in its movements, none can predict of this
latter when or where its effects will most be felt, and all around are
therefore kept in a state of fever closely resembling that which dis-
tinguishes the financial action of the present hour. The deluge
comes at last, destroying both property and life, and making a
desert where atl before had been happiness and peace.
It is to restrictions upon the formation of the dew that \^e are
now invited, leaving wholly unchecked the action of those who pro-
fit of the desolation caused by the water-spout. What are the
results that seem to me likely to be obtained as a consequence of
acceptance of the invitation, I propose to show in another letter,
and meanwhile remain, my dear sir,
Yours, very truly,
HENRY C. CAREY.
Hon. Schuyler Colfax.
Philadelphia, Feb. 15, 1865.
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THE CURRENCY QUESTION.
LETTER FIFTEENTH.
Dear Sir : —
The lugubrious predictions of the London Times have, thus
far, not been verified. The war is now, to all appearance, coming
rapidly to a close, and not only are we not yet ruined, but there
prevails throughout the country a prosperity such as, until recently,
had never before been known. To what causes may this properly
be attributed ? How has it been possible that a community should
have furnished so many hundreds of thousands of men, and so
many thousands of millions of the material of war, without be-
coming even poorer than before ? Let us see.
The act of secession by the South was an act of emancipation
/or the North. Up to that date the latter had been mere colo-
nies, governed by those '* wealthy British capitalists" whose mode
of action is so well described in the Parliamentary Report, an
extract from which has already more than once been given, but
here repeated because of its powerful bearing on the question now
before us : —
*' The laboring classes generally, in the manufacturing districts
of this country, and especially in the iron and coal districts, are
very little aware of the extent to which they are often indebted for
their being employed at all to the immense losses which their em-
ployers voluntarily incur, in bad times, in order to destroy foreign
competition, and to gain and keep possession of foreign markets.
Authentic instances are well known of employers having in such
times carried on their works at a loss amounting in the aggregate
to three or four hundred thousand pounds in the course of three or
four years. If the efforts of those who encourage the combinations
to restrict the amount of labor and to produce strikes were to be
successful for any length of time, the great accumulations of capital
could no longer be made which enable a few of the most wealthy
capitalists to overwhelm all foreign competition in times of great
depression, and thus to clear the way for the whole trade to step in
when prices revive, and to carry on a great business before /om^?i
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capital can again accumulate to such an extent as to be able to
establish a competition in prices with any chance of success. The
large capitals of this country are the great instruments of warfare
against the competing capital of foreign countries, and are the most
essential instruments now remaining by which our raanufecturing
supremacy can be maintained; the other elements— cheap labor,
abundance of raw material, means of communication, and skilled
labor — being rapidly in process of being equalized. ^^
Profiting of its liberty, the North at once determined on the
adoption of measures of protection to the farmer in his efforts for
bringing the consumer of his products to take his place in the
immediate neighborhood of t^ie place *of production, and thus to
relieve him from the oppressive tax of transportation imposed upon
him by the system above so well described. The effect of this now
exhibits itself in the facts —
That the development of our mineral resources has been great
beyond all former example:
That diversification in the pursuits of our people now exhibits
itself in the naturalization of many of the minor branches of in-
dustry in regard to which we had before been wholly dependent
upon Europe :
That the demand for labor has been so great as to cause large
increase of wages :
That the high price of labor has caused great increase of immi-
gration :
That demand for th^ farmer^s products has so largely increased
as to have almost altogether freed him from dependence on the
uncertain markets of Europe :
That the internal commerce has so largely grown as to have
doubled in its money value the many hundreds of millions of rail-
road stock :
That the prosperity of existing railroads has caused large in-
crease in the number and the extent of roads :
That here, for the first time in the history of the world, has been
exhibited a community in which every man who had labor to sell
could sell it if he would, while every man who had coal, iron, food,
or cloth to sell could find at once a person able and willing to buy
and pay for it :
That, for the first time, too, in the history of the world, there
has been presented a community in which nearly all business was
done for cash; and in which debt had scarcely an existence :
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That, as a necessary consequence of this, there has been a large
and general diminution of the rate of interest :
That farmers, laborers, miners, and traders have therefore become
more independent of the capitalist, while the country at large has
become more independent of the ^^wealthy capitalists'^ of Europe:
That, so great have been the economies of labor and its pro-
ducts, resulting from great rapidity of the societary circulation,
that, wliile building more houses and mills, constructing more
roads, erecting more machinery, and living better than ever before,
our people have been enabled to contribute, in the form of taxes
and loans, no less a sum than three thousand millions of dollars
to the support of government.
These are wonderful results, and for them we have been largely,
yet not wholly, indebted to the re-adoption of the protective system.
That alone was capable of doing much, but we should have failed
in the prosecution of the war had not the Treasury, by the esta-
blishment of a general medium of circulation, given us what has
proved to be a great clearing house, to which were brought labor
and all of labor's products to be exchanged. Increased rapidity
of circulation was a necessary consequence of this, and to that
increase the greatly improved health of the societary body has
been wholly due.
Such having been the results of the two great measures by which
the first period of Mr. Lincoln's administration had been distin-
guished, it might have been believed that neither one of them
would be abandoned without at least a full and fair inquiry into
the probable consequences of any changes that might be suggested.
Those who might have so thought could vscarcely, however, have
reflected upon the general character of our legislation. " No
people," as it has been said, '' so soon forget yesterday." None
take so little thought of to-morrow. No one looks back to study
the cause of the good or evil that exists, and it is as a consequence
of this that we have so constantly relapsed into British free trade
almost at the first moment that protection had brought about a
cure of the evils of which it had been the cause. Hitherto, since
1861, our course has been onward, and in the direction that
above is indicated. Now, as I propose to show, we are steadily
retracing our steps; and if the forward movement has led us to
our present prosperous state, it can scarcely well be doubted that
the backward one will lead us once again to that calamitous one
from which we so recently have emerged.
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The most serJous move in the retrograde direction is that one
we find in the determination to prohibit the further issue of that
circulation to which we have been so much indebted. Why is it
made ? Because journalists fancy that it is to "paper money ^' they
must attribute the, to them, great fact that paper is so high I Be-
cause men who depend on fixed incomes fancy that they should
live better were the gold standard once again adopted I Because
every free-trader in the land charges the high price of gold to the
use of "greenbacks,^' and sees therein the causes why he cannot,
with profit to himself, fill our markets with British cloth and British
iron I.
What is the present effect of the hesitation of the Treasury to
use the power that yet remains at its command ? It is paralyzing
the societary movement, to the great loss of both the people and
the Government. Labor is less in demand. Cloth, iron, and a
thousand other commodities move more slowly. Why all these
things ? Because the Treasury does not fulfil its contracts. The
unpaid requisitions amount to $125,000,000, and the Treasury is
empty. The contractor who obtains a certificate sells it at heavy
loss ; while many, as I am told, find difficulties interposed in the
way of obtaining certificates, most of which have their origin in
the indisposition to achiowledge debt when there exist no means
with which to pay it. How it is with the men who are now serving
in the field was well shown, a few days since, by Senator Wilson,
when he told his brother Senators that "they needed more money
than they could obtain to pay their just debts — what they had
agreed to pay." '' Tens of millions of dollars,'' he continued, " are
now due to our armies, many of whose officers have been unpaid
for months ; the Generals, meanwhile, holding by handfuls resigna-
tions tendered by men who find themselves forced to retire, as the
only means now left to them of providing for their families."
Turning now to a letter in this day's Tribune, I find a statement
of the facts of the case, and their effects, to which you may perhaps
excuse me for asking your attention. It is as follows : —
" It is useless to deny the fact that men once ardent in the cause
are becoming lukewarm in their attachment to a Government which
so sadly fails to discharge, in this respect, its self-imposed obliga-
tions, and seems so careless of those over whom specially the aegis
of its protection should be thrown. No wonder that the soldier
should grow weary when he reflects that his arduous hardships,
undergone on long marches, in the trenches, on the picket line,
scorching then under the rays of a midsummer's sun, and shivering
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now in the merciless blasts of winter, exposed to all tlie inclemen-
cies of a variable climate, are suffered to go so long unrecognized
by his Government ; no wonder that when every mail brings him
the old story of his family^s destitution, and when he remembers
his inability to aid them, he should grow lukewarm in the cause
which years ago he espoused with all the ardor of a man and a
patriot. It is in vain that he tries to place country above home —
above the wife whom he has solemnly sworn to cherish and protect,
the offspring whom Heaven has given him to support, or the aged
parents whose infirmities demand his filial consideration ; the
thought of his domestic responsibilities will absorb all others, and
will embitter every hour of his soldier-life.
'* Every day resignations are forwarded by officers whom stern
necessity has compelled to a^k for their discharge from the military
service, in order that they may return home to relieve the pressing
wants of their families, and shall we say, too, that desertions to
the enemy frequently occur whenever men are impelled by the same
motives. OfiScers and men, in making application for leaves and
furloughs, are often forced to make the humiliating confession that
they desire to go home to restore order to their households, upon
which, during their absence, shame and dishonor have fallen, and
the plea of their families' extreme destitution is still more frequent.
In the name of humanity, then, let the troops be paid with as little
delay as possible ; the best interests of the service demand it."
Entirely in keeping with this are statements coming from the
West, of the great distress of Government contractors compelled
to forced sales of the vouchers in their hands— of the great rise in
the general rate of interest— and of the extremely sluggish state of
the societary circulation. The Government has made itself respon-
sible for the financial movement of the country, and when it stops
payment there is stoppage everywhere.
Why has it stopped ? Because those in the control of public
journals fail to see that the cause of the high price of paper and
of gold cannot be found in the circulation ! Because the Govern-
ment itself fails to see that the circulation now furnished bears a
smaller proportion to the needs of the people, and to the extent of
country requiring to be supplied, than did that which was furnished
when gold could be bought at an advance of 10, 12, or 15 per
cent. 1 Because all who write or speak on this subject fail to see
that, with the extension of the power of the Union over the Cotton
States, there must arise an absolute necessity for furnishing to the
people of those States machinery of circulation adequate to the
performance of the same work that has so well been done in these
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Northern States ! So far from diminishing the supply of that
machinery, there is a pressing necessity for its increase.
Anxious for a reduction in the price of gold, journalists are
almost everywhere calling upon Congress to increase the taxes, to
give up selling machinery of circulation that costs it nothing, and
to take to buying such machinery at the market price. Obedient to
their orders the treasury is buying it, and the price at which it buys
is shown in the following extract from an advertisement of the
loan that is now on sale : —
" By authority of the Secretary of the Treasury, the undersigned
has assumed the general subscription agency for the sale of United
States treasury notes bearing seven ,and three-tenths per cent,
interest per annum, known as the seven-thirty loan. These
notes are issued under date of August 15, 1864, and are payable
three years from that time, in currency, or are convertible at the
option of the holder into U. S. 5-20 six per cent, gold-bearing
BONDS. These bonds are now worth a premium of nine per cent.,
including gold interest from November, which makes the actual
profit on the 7-30 loan, at current rates, including interest, about
ten per cent, per annum, besides its exemption from State and
municipal taxation, which adds from one to three per cent, more^
according to the rates levied on other property.'^
This is certainly a high price to pay for the use of a little money,
and the reason why it is so high is that the supply of the com-
modity needed is diminishing in the proportion borne by it to
public and private needs.
We have here, however, only .$200,000,000, interest upon which
is to be paid in gold three years hence. Six hundred millions
more are now asked for, and the demand is, we are told, to be
accompanied by a withdrawal of even the existing power to
furnish legal tenders bearing interest. As those now existing be-
come more and more withdrawn from circulation, the societary
machinery must gradually diminish in its quantity, and that, too,
just at the time when the theatre on which it is to be employed is
likely to be almost doubled. The necessary consequence of this
must be such a rise in the rate of interest as will compel the ex-
port of -Government bonds, and the rapid increase of dependence
on the money markets of Europe — each step backward being thus
but the precursor of another and greater one. So long as they
shall continue to be sold abroad money will continue to be obtain-
able ; but when the foreign market shall have become fully glutted
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it will, as in the period from 1831 to 1842, become unobtainable
at any price.
The gold interest now payable requires $60,000,000. Adding
these new loans, and making their interest payable in gold, we
shall, three years hence, need $108,000,000, most of which is likely
to have to go to Europe. Add now to this, first, the $30,000,000
required for payment of interest on the old foreign free trade debt ;
second, only an equal amount for absentees, temporary and perma-
nent; and we obtain a demand amounting to $168,000,000, that
7nust be met before we can purchase a piece of cloth or a ton of
iron. Where is all this gold to come from ?
Tax the people 1 is the answer. Give us an income tax of 25
per cent. I Tax sales I Tax manufactures ! All this is being done,
and so thoroughly that important branches of manufacture are
likely to be taxed entirely out of existence. Paying his taxes in
paper, and obtaining cash for his products, the ironmaster can
scarcely even to-day make head against those '' wealthy capitalists'^
of England who have already placed themselves on such a footing,
as regards freight and duty, that it is they who, under a gold system,
will be protected, and not their American competitors. So, too,
with paper, the domestic taxes on which are ten per cent, while
foreign paper is likely to be admitted at three. So, too, as I under-
stand, is it with leather. Mr. Sherman tells us that $40,000,000
in gold will be required to purchase paper abroad that if made at
home would yield $10,000,000 to the treasury. Add to this
$100,000,000 to pay for the iron needed for taking the place
of that now made in furnaces that will then be out of blast,
and we shall have quite enough to pay to those European nations
whose markets are now glutted with food, and who have taken
from us, in the past five months, of flour, wheat, and corn, just as
much, and no more, as would command in gold somewhat less
than two millions of dollars."^
The contributions to the internal revenue made by paper, iron,
and leather, appear, under the retrograde system now inaugurated,
likely to be very small indeed. How will it be with other manu-
factures, paying as they must, at a gold value, duties that had been
laid when two dollars in paper had been but the equivalent of one
* The precise quantities of these commodities shipped to Belgium, France,
and Britain, has been : Of flour, 59,998 barrels ; of wheat, 1,305,313 bushels ;
and of corn, 56,933 bushels.
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in gold ? How will it be with the farmer, obliged to look to Europe
for a market for his products ? How will it be with the miner and
the laborer when rolling-mills are closed and mines have ceased to
be worked ? The answer to all these questions will be found in
the simple propositions, that the power of accumulation increases
almost geometrically as the rapidity of the societary circulation
increases arithmetically ; and that it declines in the same propor-
tion as the circulation becomes more languid. In the few years
through which we just have passed it has been increasing rapidly,
but, under the change of policy that has been now inaugurated, it is
already slowly moving in the opposite direction. Admitting the
truth of those propositions, then must it be also admitted that,
prompted by an anxious desire once again to handle gold, we are
killing the goose that has already laid the many golden eggs so well
described in the following paragraph, from this day's Tribune: —
'* The internal revenue for the month of January just past
amounted to the enormous sum of $31,076,902 89 — over a million
of dollars a day, including Sunday I And yet confessedly the
machinery for collecting this branch of the nation's income is im-
perfect and undergoing change. Yast as is that sum of internal
revenue, daily and monthly, how light a burden is it to the business
of this rich and vigorous nation I And with what patriotic cheer-
fulness and acquiescence the people pay this tax to preserve their
nation and to maintain democracy."
To what do we owe these wonderful results of a state of civil
war ? To rapidity of the societary circulation, and to nothing
else ! To what have we been indebted for that rapidity */ To pro-
tection and the " greenbacks'' ! What is it that we are now labor-
ing to destroy ? Protection and the Greenback !
Let us continue on in the direction in which we now are moving,
and we shall ere long see, not resumption but repudiation ; not a
contradiction but a confirmation of the predictions of the Times ;
not a re-establishment of the Union, but a complete and final dis-
ruption of it.
What are the means by which these calamities may be avoided,
I propose to show in another and final letter, and meanwhile
remain, my dear sir,
Yours, very truly,
HENRY C. CAREY.
Hon. Schuyler Colfax.
Philadelphia, February 17, 1865.
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THE CUREENCY QUESTION.
LETTER SIXTEENTH.
Dear Sir: —
The measures now in preparation, as regards both the customs
and internal revenues, tend, as it appears to me, in the direction of
stoppage of the societary circulation, of rise in the rate of interest,
of increase in the power of men engaged in the creation of financial
water-spouts, and of permanent maintenance of a premium on the
precious metals. If so, then, if we are ever again to witness here
the regular redemption of promises to furnish gold and silver, it
must occur as a consequence of the adoption of a course of policy
directly the reverse of all that recently has been done, and all that,
if w^e are to credit the public journals, is in the contemplation of
those who are charged with the direction of our iBnancial move-
ments.
The existing derangement of the currency is wholly due to the
action of those who manage the windhag system described in a
former letter, and while their operations shall continue to be, as
now they are, wholly unrestrained, financial crises must continue
to reappear, and the price of gold must continue to be as uncertain
as is their course of action. Such being the case, it is of high
importance that proper checks be forthwith instituted, and now,
for the first time in our history, is it in the power of Congress to
let us have them. To that end, let us have a law declaring-^-
First, that no bank shall hereafter so extend its investments as
to hold in any form other than those of gold, silver, TJ. S. notes,
or notes of national banks, more than twice its capital :
Second, that in the case of already existing banks whose invest-
ments are outside of the limits above described, any extension
thereof beyond the amount at which they stood on the first of the
present month shall be followed by instant forfeiture of its charter.
Having thus established a check upon further extension, the
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next step .should be in the direction of bringing the operations of
existing banks within proper limits. To that end, let us have a
provision imposing on all investments outside of the limits above
described a tax which, when added to that already existing, shall
amount for the present year to one per cent. In the second year
let it be made 1:^ per cent, on all over 90 per cent, in excess of the
actual capital upon which dividends are paid. In the third, I^
per cent, over 80 per cent. ; and in the fourth, If over TO per cent.
Thenceforth let the tax grow at the rate of a quarter per cent, per
annum until, by degrees, all banks shall have so enlarged their
capitals, or so reduced their loans, as to free themselves from its
further payment.
Holding interest-paying securities tO per cent, in excess of its
capital, a bank would be always in a condition of perfect safety,
and could give to its stockholders dividends of at least 8 per cent.
Such stock would be preferable to almost any other securities in
the market, and there would be no difficulty in so enlarging the
foundation as to give to the whole structure the form of a true
pyramid, instead of the inverted one which now presents itself to
the eye of all observers.
Let us have a law embracing these provisions, and we shall then
be fairly on the way towards the establishment of a financial sys-
tem the most perfect the world has ever seen. Let us have it, and,
as you will clearly see, the need for restrictions on the circulation
will wholly have passed away. The day, indeed, will then be near
at hand when banks will have ceased to be competitors with the
Treasury for furnishing circulating notes of any kind, and when
the nation may profit to the extent of 50, if not even 60 millions
a year of the power to furnish the machinery of circulation.
Simultaneously with the passage of such a law, let the Govern-
ment determine honestly to pay its debts. The soldier in the field,
and the officer who is placing his life in daily hazard, have a right
to demand of the Treasury that it shall give them such certificates
of its indebtedness as will enable their wives and children to go to
the neighboring shop and purchase food and clothing.* The con-
tractor and the shipbuilder have a right to claim that when certifi-
cates are issued they shall be in such a form as will enable them to
* The amount now due to the army alone is stated by Senator Wilson
at the enormous sum of one hundred and thirty-eight millions of dollars.
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avoid the further payment of the usurious interest to which they
have so long been subjected. Paying promptly, the Government
will buy cheaply ; and should such payment have the effect of
causing the supply of *' greenbacks" to be in excess of the demand,
the Treasury will thence derive a double benefit : first, in being
thus enabled to borrow what it needs at reasonable rates ; and
second, in having its need for borrowing diminished by reason of
the increased stimulus thereby given to that societary circulation
upon the rapidity of which it is dependent for both the mainte-
nance and the growth of the Internal Revenue.
The whole South now requires reorganization, and one of the
first steps in that direction should be found in furnishing machinery
of circulation. As much in need of this stands the whole of that
great West for the development of whose wonderful powers we are
now exporting in that direction so many hundreds of thousands of
our people. If the Government does not supply that machinery,
who is there that can or will do so ? Look carefully, I pray you,
my dear sir, at the vast field that is to be occupied, and at the
great work that is to be done, and then wonder with me that the
Government should permit its soldiers to perish in the field, while
it is debating the terms of a loan to be made to it by men all of
whose interests are to be promoted by a diminution of the circula-
tion and an increase of the rate of interest. Let our soldiers be
paid, let the credit of the Government be once again re-established,
let the rate of interest be kept down, and let the Treasury reassert
its independence, and all will yet go well.
Having thus, as paymaster, re-established its credit, let it next
place itself in a creditable position as regards those who had been
led to see in the Morrill Tariff a pledge of protection against those
^* wealthy capitalists" whose fortunes count by millions, and who
use those millions as "instruments of warfare" by means of which
they are enabled to ''overwhelm all foreign competition, and to
gain and keep possession of foreign markets." Let it restore
those great fundamental branches of industry which constitute the
pillars of our national temple to the position in which they stood
in 1861, increasing the duties on foreign products by just so much
as the taxes since imposed on domestic ones, and the result will
then exhibit itself in the fact that sugar, tea, coffee, soda ash, and
other raw materials of food and manufacture, will twice over make
amends for any loss that may be experienced by the revenue be-
ll
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cause of the substitution of domestic cloth or iron for that now
made in foreign furnaces or on foreign looms.
Let these things be done, and we shall then cease to look abroad
for purchasers of our bonds. Let this be done, and we shall soon
find ourselves on the road towards becoming purchasers of those
now held abroad, every one of which should he redeemed hefore we
ever again place ourselves in a position to he required to furnish
gold and silver in payment of our notes.
To many it might seem that this would be a postponement of
resumption to a date so distant that none of them would live to
see it. Let, however, all such persons study what was done in
this respect in the brief period of the existence of the tariffs of
1828 and 1842 ; let them next look to what has been done in the
past four years ; and they will see that all that I have indicated as
what is needed to be done, is only what, under a sound and per-
manent system, may he done hefore the lapse of the next decade.
As a rule, reformers desire to move too rapidly, and therefore
fail to attain their objects. They omit to see that when Nature
has important purposes to accomplish, she works slowly and with
almost invisible machinery, as when she sends the daily morning
dew. When she desires merely to destroy a ship or to root up a
forest, she sends the tornado or the water-spout. Let us follow
her example. We have a great work to accomplish, and we should
now profit of the lesson read to the world in that period which
followed the close of the great war of the French Revolution, and
exhibited a scene of destruction that had never before, in time of
peace, been witnessed. Believing it to be one that should be care-
fully studied, I now invite you, my dear sir, to accompany me in a
brief review of the facts in the order of their occurrence.
For twenty years the Bank of England had been injecting gas
into the currency, but with the return of peace it became necessary
that it should be steadily withdrawn. In the two years from 1815
to 1817, the bank directors had, by means of the very simple opera-
tion of calling in its claims on one hand, and reducing its liabilities
on the other, reduced the apparent quantity of money at the com-
mand of the community to the extent of £12,000,000, or little
short of $60,000,000. So far as regarded the operations of society,
this had been equivalent to a total annihilation of that large sum,
and to that extent a contraction of the standard by which the com-
munity was required to measure the value of all other commodities
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and things. Had the yardstick been doubled in length, or the
pound in weight, for the benefit of all persons who had contracted
to purchase cloth or corn, the injury inflicted would have been
trivial by comparison with the change that was thus effected. As
compared with the property of the people of Great Britain, that
sum was utterly insignificant, yet did its abstraction cause an arrest
of the circulation almost as complete as would be that produced
in the physical body by stoppage of the supply of food. Farmers
and merchants were everywhere ruined. Of the country banks, no
less than t^o hundred and forty — being one in four of their whole
number — stopped payment ; while one in ten and a half became
actually bankrupt. *' Thousands upon thousands," says Mr. Mc-
Culloch, ''who had in 1812 considered themselves affluent, found
they were destitute of all real property, and sunk, as if by en-
chantment, and without any fault of their own, into the abyss of
poverty." Throughout the country, there was, to use the words of
Mr. Francis Horner, "an universality of wretchedness and misery
which had never been equalled, except perhaps by the breaking
up of the Mississippi Scheme in France." In the midst of all this
ruin, however, the hank, which had supplied the gas, prospered more
than ever, for the destruction of private credit rendered its vaults
and its notes more necessary to the community.
The groundwork having thus been laid by the bank, Parliament
passed, in 1819, an act providing for the resumption of specie
payments, and thus re-established, as the law of the land, the
standard that had existed in 11 97 — among the most remarkable
measures of confiscation to be found in the annals of legislation.
For more than twenty years all the transactions of the United
Kingdom had been based upon a currency less in value than that
which had existed in 1196. In the course of that long period,
land had been sold, mortgages given, settlements made, and other
contracts of a permanent nature entered into, to the extent of thou-
sands of millions of pounds, the terms of all of which were now to
be changed for the benefit of the receivers of fixed incomes, and to
the loss of those who had land, labor, or the produce of either, to
sell. As a necessary consequence, land fell exceedingly in price,
and mortgagees everywhere entered into possession. Labor be-
came superabundant, and the laborer suffered for want of food.
Machinery of every kind was thrown out of use, and manufacturers
were ruined. Manufactures, being in excess of the demand, were
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